Despite the private capital industry’s proven track record, many investors still view private equity (PE) and venture capital (VC) as risky investments.
The Southern African Venture Capital and Private Equity Association (SAVCA) says this conversation around risk in private markets is long overdue for reframing.
Thato Tsita, partner at Tamela Capital Partners, says, “In listed markets, risk is often equated with volatility, whereas in private markets it is actively managed, priced and transformed into value. Illiquidity, leverage and concentration are not weaknesses but deliberate design features that allow private market funds to convert uncertainty into long-term performance.”
Perceptions of private capital risk are shaped by its history. Early PE activity was often associated with high leverage and corporate raiding, fuelling misconceptions about speculation. “The Global Financial Crisis was a turning point,” Tsita says. “Enhanced governance, improved reporting and stronger alignment between fund managers and investors have since made private markets far more transparent and resilient.”
Speaking specifically to VC, Antonia Bothner, capital markets lead at Endeavor South Africa, says there is growing recognition that risk in the asset class is not purely about volatility, but about intentional exposure to long-term value creation. “The distinction between the risk of loss and the risk of variance is often overlooked.”
“Disciplined portfolio construction and diversification across stages, sectors and geographies make venture exposure a complementary component of broader portfolios,” she adds.
In South Africa, structural and regulatory developments are slowly rebalancing investor perception. Tsita notes the amendments to Regulation 28 of the Pension Funds Act that permit pension funds to allocate up to 15% to private market funds and up to 45% to infrastructure “recognises private capital’s critical role in growth and diversification”.
She adds, “The JSE’s shrinking pool of listings and high concentration risk have created a structural need for alternative assets. Private market funds provide exposure to unlisted companies and sectors that traditional markets can’t access.”
For Bothner, risk in VC should be viewed as a source of opportunity. “Backing exceptional founders in scalable markets often produces asymmetric upside that more than compensates for early-stage uncertainty,” she explains.
“Innovation inherently involves uncertainty, but when capital is allocated to founders solving large structural problems, the potential returns are transformative.”
