“Hedge funds in South Africa: a thriving investment opportunity for a wider audience”

Hedge funds, once the preserve of wealthy and institutional investors, are now attracting growing interest among a wider audience, in part thanks to increased regulatory scrutiny. Local consumers are investing billions of rands in this asset class for its benefits in terms of protection against financial crises and stable long-term returns.

According to the Association for Savings and Investment South Africa (ASISA), assets under management in the hedge fund sector exceeded R137.9 billion at the end of December 2023, attracting a record R6.24 billion from investment flow in 2023. This sector now has 213 funds managed by 11 approved management companies.

Alan Yates, head of distribution at Peregrine Capital, points out that hedge funds provide greater flexibility for managers to invest in diverse asset classes and use more sophisticated strategies, allowing them to generate positive returns even in periods bear markets.

Regulations put in place in 2015 have contributed to the growing popularity of hedge funds in South Africa, opening this market to individual investors and creating regulated structures tailored to different investor profiles. Funds intended for retail investors are subject to stricter restrictions to ensure adequate risk management and protect investors.

Hedge funds in South Africa come in different categories, such as SA Long Short Equity, SA Fixed Income, SA Multi-Strategy and SA Other funds. Responsible funds (RIs) are increasingly attracting retail investors due to regulatory actions taken and the increased availability of these products on different investment platforms.

In summary, hedge funds offer investors the opportunity to diversify their portfolio, manage risks more effectively and benefit from attractive returns, which explains their current popularity among a wider audience in South Africa.

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