HEDGE FUNDS & ALTERNATIVE INVESTMENTS FEATURE
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HEDGE FUNDS & ALTERNATIVE INVESTMENTS FEATURE
Should investors remain positive about local hedge funds? Local hedge funds’ performances have been muted for the last couple of years. MoneyMarketing asked RisCura’s Head of Investment Analytics, George Tsinonis, why. Last year wasn’t a good one for SA hedge funds. ASISA tells us that the industry ended 2017 with assets under management (AUM) of R62.4bn, a decline of R5bn from the R67.4bn managed at the end of 2016. Given this statistic, should investors still be positive about local hedge funds? Last year’s decline of the AUM in the hedge fund industry can be attributed to a variety of factors. Perhaps the most pertinent factor was the high level of political instability in the country, causing many investors to reallocate funds to perceived safer investments. However, it is especially during market downturns that hedge funds should be utilised, as they are vehicles with the ability to hedge away market risk. Investors should therefore remain positive in their allocation to hedge funds, as there is always a need to have natural diversifiers in portfolios. The opportunity presented by genuine market-neutral hedge funds with consistent long-term records should not be overlooked. The South African hedge fund industry is still in relative infancy. The regulatory changes should have a positive impact on the growth of local hedge funds, by increasing their risk oversight and invest-ability. Why do you think local hedge funds’ performances have been muted for the last 24 months plus? The years 2016 and especially 2017 were characterised by significant macroeconomic and stock-specific events in South Africa, which had strong influences on the asset management industry. The heightened political instability during 2017 overshadowed returns across the market, which saw a reverse in sentiment towards the end of the year. While the All Share Index returned 3.8% and 1.6% for the years 2016 and 2017, respectively, Equity Long/Short Hedge Funds returned 5.8% and -0.3% over the same period. Much of the 2017 losses can be attributed to the stock-specific impact of Steinhoff in November 2017, which reduced most of the gains made during the year. However, Market Neutral Hedge Funds returned 6.1% and 3.5% over the same period, and Multi Strategy Hedge Funds 8.7% and 7.9%. This highlights the ability of certain hedge funds to provide uncorrelated returns to the equity market, which greatly reduces the risk of a portfolio. SA was the first country to put in place comprehensive regulation for hedge fund products. What impact has this had on the industry in terms of, for example, the consolidation of product offerings? The South African regulator is one of the global leaders of hedge fund regulation, following a similar path to the European Union, with the main piece of legislation being administered through Board Notice No.52 of 2015. This specifies, among other items, the risk parameters that must be considered when measuring and managing hedge fund risk. Since its implementation, hedge fund providers have consolidated their offerings, due to the increased cost associated with greater risk management, transparency and reporting requirements. While this has hampered the short-term growth of the hedge fund industry, these rules ultimately protect the investor. Hedge funds now have stringent guidelines that are monitored on a daily and monthly basis. The increased regulatory oversight has also sharpened hedge fund offerings; there is now more George Tsinonis, clarity on investment processes and Head of portfolio construction, which ultimately Investment benefits the end investor. Analytics, RisCura
31 July 2018
Ashburton spins off Dynamic Equity Hedge Funds into empowerment business
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shburton Investments, the asset management arm of the FirstRand group, has spun off the Ashburton Dynamic Equity Hedge Funds business. There are two hedge funds in the business: the Ashburton Dynamic Equity Qualified Hedge Fund and the Ashburton Dynamic Equity Retail Investor Hedge Fund. As of 1 May 2018, the team managing the funds has operated under its newly established standalone business called Black Mountain Investment Management. Rudigor Kleyn, co-head of private markets at Ashburton Investments, says: “It gives us great pleasure to see the team operate on their own after a four-and-a-half-year incubation period at Ashburton.” Joint founder of Black Mountain Investment Management, Mohamed Dhorat, says that with a team of 30 years of experience in total, Black Mountain Investment Management aspires to be the leading, empowered asset management and investment holding company in southern Africa. “The team, which also includes Ashay Deochand and Craig Lyall,
offers a niche, activist style of investing that aims to bridge a widening gap in the alternative investment space between regulated hedge funds and private equity funds. “We are very excited about continuing on our own and offering a stand-apart fund that has historically been uncorrelated with the market and many of its peers.” Ashburton Dynamic Equity Hedge Funds employs multiple equitybased strategies and invests primarily in the South African listed equity and derivatives markets. The fund focuses on building a fundamental core portfolio and applying several satellite strategies around the core. The Ashburton Dynamic Equity Qualified Hedge Fund received the Hedge News Africa award for the best performing long/short equity hedge fund in South Africa for 2016. The Ashburton Dynamic Equity Hedge Funds will remain with the Ashburton Management Company (RF) Proprietary Limited for a period before moving to a new management company and rebranding under the new company.
AFIG Funds CEO receives Private Equity Africa Award
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rivate Equity Africa (PEA) awarded Papa Ndiaye, CEO of AFIG Funds – the private equity fund management company founded in 2005 in Mauritius – the 2018 Outstanding Leadership Award at a ceremony held in London last month. PEA is a the London-based publication dealing with private equity on the African continent. “I have had the privilege of seeing the African private equity industry blossom from its very humble beginnings in the 1990s, and I firmly believe that the best years are ahead of us,” says Ndiaye. “This award is a strong testament to the commitment and hard work of my colleagues at AFIG Funds, who have accepted the challenge of promoting private equity in both established and frontier markets on the continent,” he adds. “Thanks to their hard work and excellence, we have invested across 12 countries to date and impacted the development of African blue-chip companies in several sectors, while providing healthy returns,” he says. Papa Ndiaye (left) receives the 2018 Private Equity Africa’s Outstanding Leadership Award.