IFSA Private Equity’s investment funds started capturing new investors’ attention in 2019, when funds growth hit record high and started realising incredible returns for investors.
Before that, our team had to work hard to secure the initial capital for building our company. While the idea of private equity had been around for a long time, it is only recently that investments in private equity have started becoming mainstream – especially on the local front.
In this Q&A, IFSA CEO Frikkie van Loggerenberg shares behind-the-scenes details about the origins and evolution of IFSA – and how we’ve managed to grow to a point where we currently have R600 million in our private equity fund.
What was IFSA’s initial vision, and has this changed since its inception?
We started out wanting to solve a specific problem: How do we connect an investible opportunity to businesses that require cash and skills to grow and scale? Turning this challenge into an opportunity was not plain sailing at all.
The fact that we could put these two things together inspired the passion to continue growing IFSA Private Equity, eventually turning it into the landmark private equity firm we envisioned since inception.
But over time, this focus has completely changed.
Initially, we set out to build this big private equity company, but along the line, we saw that it is relationship driven, 100%. Rand and cent are extremely important, but the relationship with all our parties is what the focus needs to be.
What did it take to succeed the way you have?
Blood, sweat, tears, and a lot of praying. It’s serious. The investment space is extremely new-business driven, which means you don’t have a specific pipeline where you know you have x amount of orders coming in and you know what’s going on. Every month we start at zero.
Good performance with poor service can only get you so far for so long. Same thing on the flip side – poor performance and good service is just not good enough. The secret is to keep your relationships as good as possible, while making the right calls on the investment front. In that regard, we were blessed that things worked out for us the way we planned.
In my opinion, it is the culture of urgency that drives excellence in every aspect of our work.
It is this sense of urgency that keeps us fine-tuning our processes, and we know all too well how important it is to take care of each of our investors and independent financial advisors.
What does success look like for IFSA?
Let me answer it like this – IFSA never wants to stop, end or cease growing in any way. IFSA will likely keep getting bigger and better. But as for the real success yardstick, that will ultimately centre around the quality of the relationships we have built over a period of time.
Your long-term value comes in when you go on the entire journey with us. We have a couple of companies that we invest in and help grow with capital and skills so that they can reach their full potential, and then we exit at a specific point in time. After that, the cycle starts from the beginning again. That is where you really start to reap benefits far beyond traditional returns.
We want to build a lifetime worth of value for our clients and help them leave a legacy for their loved ones. For me, this is what success looks like.
Can you take us on a journey of IFSA’s growth timeline?
2017 – IFSA launches fund mandate
This was the year that marked the official launch of our Cornerstone Capital Private Equity Fund. Before that, we were still in the humble beginning stages of building our new private equity firm, managing share portfolios on a discretionary basis.
The challenge during the first couple of months is that you have literally no track record available to share with new investors. You have no assets and you have to go and find assets.
Talk about virgin territory. Everybody wants to attract big-ticket investors, but nobody wants the process. You want to create an opportunity for people to invest in, but first you have to put the right things in place for that to happen.
2018 – IFSA secures seed investors
The first couple of months were quite demanding. But fortunately, we had legacy investors whose money we have been managing for close to 15 years. Initially, for the first couple of months, they were also our seed investors in IFSA’s Cornerstone Capital Private Equity Fund.
Thanks to our existing clientele, we were able to tick the track record box to some extent. We then got the capital together and had some deals.
After crossing the initial track record hurdle, we had to put the processes and procedures – all the documents, policies and mandates – in place. Practically, this was a mammoth task, because each document needed to be carefully planned, drafted, and reviewed. Next, each document had to go to ‘legal’ and they had to sign it off. Then, it had to go to ‘compliance’ and they had to approve it. So, to be fair, it’s quite a hefty initial effort to get this right.
As with any success story, there are many factors at play. However, I want to point out that our success was our investors that gave us leeway with their funds. Thanks to them, we were able to raise around R150 million in the first year. So, to go from no track record to R150 million – that’s no small feat.
It’s all thanks to people who trusted us as investment managers to do the job right, and to stick to what we said we would do. And the rest is history.
2019 – Growth strategy launches
After about a year in business, the time came to address the market need for a stable return profile type of product. As part of our growth strategy, we needed to solve a problem: there were investible opportunities but people required capital to make investments.
As Founder and CEO of IFSA, I believe that the secret is: keep relationships as good as possible, while focusing on the best investment opportunities possible.
Our investors are our everything. We will always have their back. Relationships with all parties are the central focus – we care about each and every one of them.
2020 – From bigger to better
From this point in time, we wanted to increase the size of our distribution network, because we had more and more opportunities that we identified. We also had current opportunities that required more capital to realise our expansion potential. So to get all these things together, you need inflows and you need new investment and that’s where we embarked on the challenge to build strategic relationships with advisors and brokers. Long story short, that is how we reached the R600 million that is currently in our fund.
2022 – Five years, five million rand
By 2022, we had established a good track record and good performance to show new prospective investors who want to invest in the fund.
Five years down the line, we did what we said we were going to do. From there on, it was simply a case of pushing forward. Just bigger and better.
If we look at IFSA’s growth timeline, at which stage are you now?
Right now, we are still experiencing growing pains – irrespective of the financial success we are seeing after just five years. Investment management is a function of assets under management. So, at R600 million, you are still boutique. Once you get to your first billion, that’s when things start to make a little more sense. To get there, in private equity, you require your first exit. If you ask me this same question in two years, I’m pretty sure I would answer differently. But right now, we are still aggressively driving growth from all angles.
What can we look forward to in the next two years?
In two years’ time, I think we can start anticipating our first half million rand exit. And that is a very conservative figure. Thus, in two years, we should have doubled our current asset value.
In simple terms, from this point onwards, things are just going to start happening exponentially. So, two years from now, our first exit would already have taken place. That means our total asset value will be well over a billion rand.
Five years from now?
Again, asset value would have grown exponentially. My estimate is that roughly seven to 10 years from now, we should have between 10 and 12 billion in assets under management. That is where you really start seeing the compounding effect take off and work for you.
With all the hard work that goes into it initially, then you start seeing that investment really working for you.
That’s how it goes. You first million. Your first 100 million. Then your first billion and then your first 10 billion. Then, from there on, it just becomes ‘ridiculous’. If you do the right things in the beginning – for the right reasons – then everything works together and the investment takes care of itself.
Your Cornerstone Capital fund has proven its worth – can we look forward to more similar products in the future?
In addition to the Cornerstone Capital Private Equity Funds, domestic and international, IFSA is planning to put another fund together.
Cornerstone Capital Private Debt Fund will be the latest fund that we add to the list. But Cornerstone Capital is a name that will continue to grow, along with the assets in the fund. We have no intention whatsoever of tampering with the proverbial ins and outs of that specific fund at this stage.
Also, soon you’ll start seeing international growth with the new Cornerstone US Fund, for which structures and procedures are already in place.
Where can investors get more advice?
Whether you’re a seasoned investor or just starting to build your portfolio, IFSA Private Equity welcomes the opportunity to get to know you and answer any questions you might have about investing.
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