New AIMA Chairman seeks to extend regulation for hedge fund industry

The newly appointed chairman of the Alternative Investment Management Association (AIMA) in South Africa has called for extending the regulation of the R25bn, ten-year old South African hedge fund market.

“Good regulation is good business. South African hedge fund management, regulation and risk management is a world leader and we want to extend the regulations of hedge funds to provide further investor comfort and even greater transparency for investors,” said Robert Foster, Chairman of AIMA and COO of Cape Town based Alpha Asset Management.

Foster said his other principle objective will be to de-bunk the myths surrounding the industry.

“The hedge fund industry is surrounded by misunderstanding and inaccurate perceptions. Part of my mandate as chairman of AIMA will be to pull back the perceived hedge fund veil and show institutional and private investors just how hedge funds work and manage their risk.”

He pointed to the need to legitimise an industry that’s been around for 60 years and demystify the mandates of South Africa’s approximately 120 strong, FSB-licensed hedge fund managers.

“Local hedge fund managers have outperformed traditional equity funds over the past five years with less risk and lower volatility; this being a period of positive and negative equity market performance.

“Since the start of 2004, domestic equity unit trusts have returned an average of 119.5%; long-short hedge funds in SA 151.55%; and the JSE’s All Share Index’s return was 128.55%.

Cash returned a cumulative 52.9% over the past five years in South Africa while the composite of hedge funds returned 97.71%.

In overseas markets, the index that tracks the global performance of hedge funds – the InvestHedge Single Manager Global Composite - achieved 28.4% over the last 5 years. The MSCI index which tracks the performance of the word’s stocks returned 0% over the same period.

“Funds have adhered to their individual mandates and have provided an invaluable investment option for institutions and private clients to enhance and diversify their returns.”

Foster also committed AIMA to working with the Financial Services Board (FSB) and Treasury to drive extended and appropriate regulation for the hedge fund market.

“Regulation will allow better access to a proven method of wealth creation for South Africans.”

“There is nothing to fear from hedge funds.

“We expect the hedge fund industry to grow strongly as the South African market becomes more familiar with its products, sound risk management techniques and value proposition.” said Foster.