JOHANNESBURG – Phatisa, a private equity fund manager that has launched a new app which calculates the internal rate of return on investments, is set to level out the playing field and offer investors transparency in investment schemes.
Phatisa, which manages two funds in African housing and agriculture worth R2.7 billion ($258 million), on Tuesday launched its free app that went live on Wednesday.
The app comprises three variables, including an investment time period in years, times money back a multiple (such as three times the initial investment), and the result of an internal rate of return.
Describing the app as a “first for Africa”, Stuart Bradley, senior partner at Phatisa, says the app will not replace detailed financial modelling required for investment evaluation, but it gives an immediate answer that can help investors early on in the decision-making process.
“It could be used as a quick check during negotiations with potential investee companies, during internal deal team discussions or while on the go,” Bradley explains.
“It’s a first, we don’t think that any other private equity fund has come to the market with this, it would be nice if our competitors use it as well,” he adds.
Source: Phatisa / iTunes
The Phatisa app is equipped with a news segment relating to African private equity, exchange rates featuring currencies streamed live, and an agricultural commodity price feature updated daily.
Phatisa raises money from international investors, government and development finance institutions to invest in businesses relating to food and agriculture across Africa.
“Unlike the JSE and listed investments, we invest in private companies that typically can’t go to the banks. They need permanent equity in their businesses, we can provide that,” Bradley says.
The fund’s investment philosophy, as with most private equity firms, is to grow businesses and sell its interest within a period of five to seven years.
“When we are making investments, we need to look at the rate of return made on our money and the multiple of our money and that’s how we measure ourselves and how investors measures us,” Bradley adds.
Recently the fund manager sector has courted debates about the changing role of private equity managers, with advances in technology encroaching on the industry. Bradley says there will still be a need for fund managers, but the app helps put context to investment returns.
The approach to equity managers is broad, as they can assess investments from a holistic point of view including the country/destination for investments, quality of the team managing the investment, its track record and the history of business invested in.
“I don’t think private equity is dead. It’s a growing industry and transforming especially in Africa.”
There are a lot of big players coming into Africa, as the continent is a new frontier on the back of growing gross domestic product, emerging middle class and people moving from rural communities to cities, Bradley notes.
Bradley says the app also helps investors to benchmark the price they are willing to fork out for an investment. “This does not take away the use of spreadsheets or programmes such as excel. We still rely heavily on computers and build very complicated financial models. To be fair, the app gives you an approximation of returns.”
Phatisa’s app is not only designed for the private equity sector, but also anyone who has an interest in the investment market in general.
There is not much of a customisation option to the app in terms of matching investments to an investor’s profile, which Bradley says is a work in progress.
The app is available on iOS (Apple) and Android platforms.
1$ = R10.74 (Wednesday, 18:00).