To our partners,
The global financial crisis fundamentally affected every area of investment, and private equity was no exception. While the pre-2008 years were extraordinary for the industry, credit has since been reigned in and there has been a flight to liquidity, with some banks and funds having been left exposed. As personal and corporate balance sheets have sought strength everywhere, investors have lost their appetite for risk and the institutional investment community has had to pause to reassess its asset allocations.
Within this context the challenge remains for us to:
- grow value beyond that offered by the more liquid public markets;
- do so with low levels of financial gearing supporting sustainable growth businesses;
- lead our industry and maintain consistent, top-quartile performance;
- make better companies by adding insight, skills, systems, acquisitions and advice while building up their environmental, social and governance standing; and
- help build and represent the case for our asset class as a positive contributor to society, supporter of entrepreneurs and generator of long-term wealth enhancement of investors.
In the current environment, the team at Metier continues to build on our track record, strengthen our industry expertise and broaden our operational and strategic skills in order to take advantage of new opportunities. This investment approach will continue to earn superior returns even in a more demanding economic environment.
Between 2005 and 2007, private equity firms raised more capital globally than in the industry's history. It now appears that in many cases the acquisition multiples and levels of debt taken on during that period were excessive. This led not only to highly leveraged, but also to over-priced transactions, many of which now require restructuring. Our sensible approach to choosing investments that will deliver over the long-term and are lightly geared has thankfully spared us from much of the fall-out in the rest of the sector.
Increasing regulatory oversight, emanating from the United States and Europe, will impact private equity managers, particularly in emerging markets. Rules and regulations set in Washington and Brussels must now be taken into consideration, in addition to our own regulatory framework. The challenge is that unique, local imperatives such as job creation, increased competition, transformation, entrepreneurship, empowerment as well as long term economic development can be affected. In addition, although private equity in the Southern African context could facilitate regional economic development, public and political perceptions have been affected by global media coverage that associates the asset class with risk, heavy debt and cuts in employment. On the contrary, Metier's track record shows that superior returns, responsible gearing, and growth in both value and employment can be achieved.
The Lereko Metier Capital Growth Fund is in good shape. While we may not yet have met all of our expectations, we are on track to do so. It is worth noting that our fund cycle is designed for patience and perseverance, and our people know this and relish the challenge to build long-term value. Significantly, our team remains strong and is well positioned to take on new challenges.
We continue to provide an important bridge between entrepreneurs who seek capital to grow their businesses and large investment institutions looking for opportunities to grow their money. We are proud of Metier's development and enjoy working with partners who share our business philosophy of creating material long-term and sustainable value. We thank you for considering us as your partners in this common quest.