Ethos Capital's investment objective is to develop a diversified portfolio of investments that will provide its Shareholders with superior long-term returns by leveraging Ethos Private Equity's active management model to maximise investor returns.
Ethos Capital will obtain exposure to a diversified pool of unlisted assets. This exposure will be achieved through the following investment strategies, which are the primary lines of business of Ethos Capital:
- Primary Investments: consisting of commitments to various Ethos Funds (whether directly or through other intermediate holding entities) during their respective fund-raising processes;
- Secondary Investments: acquisitions (whether directly or through other intermediate holding entities) of existing Limited Partner interests in various Ethos Funds;
- Direct Investments: acquisitions of interests in underlying investee companies from Ethos Funds and/or acquisitions of interests in underlying investee companies (whether directly or through other intermediate holding entities) alongside Ethos Funds to the extent that the Ethos Funds require co-investors in the underlying investee companies; and
- Temporary Investments: Ethos Capital will also make temporary investments in a portfolio of low-risk, liquid debt instruments (including, inter alia, South African government bonds and other similar, low-risk, liquid instruments) for cash management purposes, as appropriate.
Ethos Capital was listed on the JSE in August 2016, raising R1.8 billion. As at 30 June 2017, the Company had committed R0.7 billion to Ethos Funds and invested 18% of the capital, providing access to nine underlying Portfolio Companies. As at 30 June 2017, Ethos Capital had a NAV of R1.87 billion and a NAVPS of R10.37.
Post year-end, Ethos Capital made further commitments to Ethos Funds and Direct Investments, increasing its commitments to R1.3 billion, and with three new Portfolio Company investments completed or agreed, its invested capital base will increase to R746 million (40% of the NAV). In addition, at the September 2017 Board meeting, the Board approved a further Direct Investment of R100 million and initial commitments to Ethos Fund VII (R1.25 billion), Ethos Mezzanine Partners Fund 3 (R250 million) and Ethos Healthcare Fund I (R250 million).
The Board's medium-term objective is to fully invest Ethos Capital's NAV and is assessing further commitments into new Ethos Fund investment programmes and Direct Investments; whilst managing the Company's liquidity and commitment strategies in a disciplined way.
The Company's share price ended the financial year at R8.74, a discount of 15.7% to the NAVPS as at 30 June 2017. It is expected that increased investment activity and growth in the portfolio value should provide a positive catalyst to the share price; however, public market perceptions are difficult to predict.
Commenting on the results, Ethos Capital CEO, Peter Hayward-Butt added:
“The past year has been an exciting one for Ethos Capital and the Ethos franchise more broadly. NAV uplift has been pleasing and invested capital, including post year-end commitments, is showing meaningful traction. Likewise, the Board and I are encouraged by new Fund and investment opportunities being presented across all Ethos Funds. By nature, private equity is a long-term investment, requiring long-term thinking and a patient strategy. Ethos Capital remains confident in its ability to generate sustainable, market-leading returns – throughout the cycle – for its investors.”