Maturing hedge funds industry could double in size
The formation of 33 new hedge funds in the year to end June 2007 helped boost total industry assets under management by almost 70% to R25.9 billion, excluding money in unit trusts that use leverage.
According to the 2007 South African Hedge Fund Survey, released by Novare Investments in Cape Town today, there is considerable potential for hedge funds to continue their impressive run.
According to Carla de Waal, portfolio manager of Novare Investments: "Estimated capacity left in open funds has escalated to more than R30 billion. As a result, managers believe there is scope to at least double the size of the industry."
She noted that, whereas in previous years managers departing large investment houses set up most new funds, this time round start-ups tended to be launched within established companies - including large asset managers, boutique hedge fund houses and niche managers.
Some 72% of hedge fund assets are in equity long/short and equity market neutral strategies down from 74% in 2006. On the other hand, multi-strategy funds grew assets from 7.6% of all hedge fund assets in 2006 to 14% at 30 June 2007.
On regulation, de Waal said the industry had adopted a high level of self-regulation over recent years. "The proportion of funds that outsource administration has risen to 78%, signalling a definite move towards implementing global best practices.
Further peace of mind comes from the fact that funds of funds remain the largest investors in hedge funds. They make up almost 60% of assets, which takes care of most of the monitoring and compliance checking functions that are so crucial to an industry that is moving towards increased government regulation."
The Novare survey showed that fees charged by local hedge funds remain below global benchmarks; with investors also taking comfort from increased transparency that de Waal says gives "credibility to an industry that is young, yet sophisticated when measured against global peers".
