Assets managed by South African hedge funds reach an all-time high
The South African hedge fund industry has surpassed the R40 billion assets mark, reaching a new all-time high according to the Novare Investments South African Hedge Fund Survey for 2013, released in Cape Town today.
"Despite slow growth in hedge fund assets over the last five years, inflows combined with performance during the 12 months to 30 June 2013 increased total industry assets to R42.2 billion.
"This is the highest level reached, yet it remains a small fraction of the size of both local collective investment schemes with some R1.33 trillion, as well as the global hedge fund industry, which reached R23.78 trillion in size in the second quarter of 2013,” said Carla de Waal, Head of Alternative Investment Solutions at Novare Investments.
The survey, now in its tenth year, found that 13 new funds were launched of which seven were from established asset managers that already offer hedge funds.
Where strategies are concerned, equity long/short funds continued to dominate the local hedge fund industry with 52.5% of assets managed within this strategy - a significant increase from 44.9% in 2012. This increase is attributable to material new capital inflows as well as performance growth.
The second largest strategy was fixed income hedge housing 15.7% of total industry assets, followed by multi-strategy with 9.0% of industry assets. Equity market neutral continued to lose market share and accounted for only 7.4% of total assets, compared to 14.6% in 2012.
On asset flows, de Waal said: "Just over R5 billion of new capital was invested into hedge funds over the year to end June with equity long/short funds receiving the highest inflows of just over R4 billion. Fixed income hedge funds received nearly R600 million and equity market neutral funds suffered net outflows of approximately R350 million.”
The 10 largest hedge funds as at 30 June 2013 managed R17.3 billion, or 42.9% of total industry assets. These funds also received the bulk of new capital inflows.
De Waal noted that while hedge fund managers have been regulated since October 2007 under the Financial Advisory and Intermediary Services Act (FAIS), further progress on the regulatory front has been the explicit inclusion of hedge funds as a separate category in Regulation 28, which governs prudential investment limits for South African pension funds.
"The Financial Services Board (FSB) and the National Treasury are in the process of bringing hedge fund products into the regulatory fold, with the proposal to regulate these funds as collective investment schemes under the Collective Investment Schemes Control Act, 2002 (CISCA),” she added.
"Where the South African hedge fund industry has historically been driven mostly by institutional demand, the ability to offer hedge funds in a regulated unit trust environment would enable a broader retail market to access hedge fund strategies.”
Looking ahead, survey participants identified regulatory reform as the largest factor to drive future industry growth.
Total hedge fund assets
