In a year when equity markets around the world, including the JSE, experienced rising volatility and weakness in the second six months, South Africa’s hedge fund managers were able to prove their mettle. The winners of the SYmmETRY Hedge Fund Awards all comfortably beat the returns of the JSE in 2007, and were recognised for their top-notch performance at the fourth annual awards ceremony that took place in Johannesburg on Thursday evening.
While the FTSE/JSE All Share Index returned approximately 19% over the 12 months, the top hedge funds recorded performances of between 27.3% and 61.5% across the various strategies in 2007.
The winners were picked from the 48 eligible hedge funds that participated in the Symmetry Multi-Manager Hedge Fund Performance Survey. Trophies were awarded to two overall winners based on their risk-adjusted performance (regardless of strategy) over one and three years – this year, both trophies went to the same fund. Winners in each of the five hedge fund categories in the survey were also recognised for their leading performance during 2007.
Although participation in the Symmetry Hedge Fund survey is open to any hedge fund, only managers who have at least R10 million under management and a twelve-month track record qualified for awards.
“This year the local hedge fund industry became more established, with fewer new funds being launched, but more funds able to boast track records of more than one year,” said Fred Liebenberg, Symmetry’s Head of Alternative and Absolute Manager Research. The number of funds qualifying for the awards grew to 48 from 34 in 2007, and assets under management included in the SYmmETRY Hedge Fund survey nearly doubled to R15 billion from R8.3 billion.
The latest data from Novare showed total South African hedge fund assets of over R26 billion as of June 2007 versus R18 billion a year earlier, representing growth of 44% over the 12 months.
“Hedge fund offerings have also continued to diversify, with the long-short equity strategy no longer completely dominating,” added Liebenberg. “This means that investors and fund-of-hedge-funds like ours have a wider choice of managers and more options for constructing portfolios for our clients. The lengthening of track records has also added to investor confidence in the sector. ”
Market volatility in the second half of 2007 gave some hedge funds their long-awaited opportunity to outperform “long-only” funds. Fund managers took full advantage of this by producing some stellar returns, led by the Praesidium SA Hedge Fund with an impressive return of 61.5% for the year.
As announced at the gala awards ceremony on Thursday evening, the SYmmETRY hedge fund winners for 2008 are:
Best 1 year performance: Fixed Income Category
The award for the best performing Fixed Income fund goes to KADD Capital’s Validus Alternative Investment Trust, with a return of 27.3% for the 12 months to end-December 2007.
Best 1 year performance: Long-Short Equity Category
The top performing fund in the Long-Short Equity category was the Praesidium SA Hedge Fund. For the year, the fund delivered an impressive 61.5%, almost 15% ahead of the next bestcompetitor fund at 46.7%.
Best 1 year performance: Market Neutral Category
The Market Neutral category was again the most contested this year,with the winner, Investec Securities’ IEB Life Policy-Absolute Return Fund, ending the year at 37.9%, compared to the runner-up at 32.9%.
Best 1 year performance: Single Manager Multi-Strategy
This is a new category for the Awards, thanks to the qualification of several multi-strategy hedge funds with track records of at least 12 months. The inaugural winner is Blue Bay Fund Managers’ Mayflower Fund with a return of 31.9% for the year.
Best 1 year performance: Trading Category
The Badger Quant Fund from DWT Securities was the best performing fund in the trading category witha return of 32.5% for the year, winning the award for the second successive year. It far outperformed its nearest rival at 19.2%.
Best risk-adjusted performance: 1 Year
The award for the overall best risk-adjusted performance over one year – taking into account all strategies - goes to the Praesidium SA Hedge Fund. The fund’s 61.5% return over the 12 months was achieved with a standard deviation of 11.2%, one of the higher in the long-short equity category.
The Fund also recorded an Omega ratio of 62,333.26 over the period, the highest recorded in the history of the Awards so far. This means that both the size and frequency of returns above those of cash were consistently large.
Best risk-adjusted performance: 3 years
The award for the overall best risk-adjusted performance over three years also goes to the Praesidium SA Hedge Fund. This is the second consecutive year that the fund has been honoured with the best three-year return.
Over three years the fund returned an annualised 36.9% with a standard deviation of 8.1%. This resulted in an Omega ratio of 23. Although its return was the second best overall, its consistency in beating the benchmark cash return contributed to its award-winning performance.
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