South African hedge funds.....

Fund Hedge London: South African hedge funds have encountered a diversification problem within their investor-base since the very beginning. That is despite the market’s sophistication, the stable economy, and the fact that skills in alternative investments have been perfecting over the last 11 years.

The investor-base diversification is a problem which Peregrine Prime is tackling head-on by putting together an Capital Introduction Event on 13-14 November in Cape Town (details here), following Terrapinn’s World Africa Hedge Funds Conference on 10-12 November. Here is an opportunity to come out to SA and review the industry during the conference and meet the managers during the Cap Intro Event.

The one outstanding feature of the local hedge fund market has been the relatively large amounts of alpha that have been generated by hedge fund managers over time, explained Jan van Niekerk (CIO of Citadel, Peregrine Holding’s wealth management division), in an article. This source of alpha is also becoming accessible to foreign investors, as some of the fund managers have already set up offshore structures that invest into South Africa. Most of these are available on a currency hedged basis.

An overview of South Africa and its market
South Africa is an example to the rest of the world in the way that it has transformed its political landscape over the last fourteen years, wrote Van Niekerk. From an oppressive regime the country has emerged as one of the most progressive democracies. (Download Jan van Niekerk’s article “Outsized alpha” from South Africa, from Opalesque here.)

There are indeed some uncertainties as to the political and judicial stability but the country has made huge strides. It is known for its rich resources but non-mining sectors comprise 94% of the economy. It has grown, economically, at 4% over the last five years – although it is currently experiencing a slowdown along with the rest of the world. Global financial markets have forced inflationary discipline with a 3 to 6% target – inflation levels are currently at 11%. Van Niekerk points out that the country’s heavy reliance on foreign capita, mainly in the form of portfolio flows, is one weakness which leads to currency volatility.

Source:
South African hedge funds, now more appetising for the international investor


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