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WHAT’S INSIDE YOUR APRIL ISSUE WHO IS BUYING CRYPTO IN SA? Demographics of the average crypto buyer in SA and how much they spend Page 8
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SUPPLEMENT: BOUTIQUE ASSET MANAGERS Boutique investment managers have been shown to outperform larger peers across geographies Page 16
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30 April 2022
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Hedge funds Q&A with Laurium’s Kim Zietsman KIM ZIETSMAN Head: Business Development and Marketing, Laurium Capital Are hedge funds a high-risk investment? To label all hedge funds (and hedge fund managers) as high risk is misleading. The risk profile of a particular hedge fund depends on the mandate of that fund. Some mandates may be very aggressive through using more leverage and having large position sizes in stocks , while others may be designed to focus on delivering low volatility returns. There are hedge fund mandates to accommodate a range of risk appetites.
are now much more transparent and highly regulated by the FSCA, which should give investors comfort. It is important to choose a manager that has a solid track record and robust investment process. One of the key risks as a hedge fund manager is that your short positions increase more than your long positions, hence focusing on your short book is incredibly important. At Laurium, we are very conscious of liquidity and will not be bigger than the average daily trading volume in any of our short positions. The use of leverage is another risk. Leverage allows hedge funds to amplify their returns, but can also magnify losses.
What are the risks? Hedge funds are obviously not without risk, as history internationally has shown. Fortunately, hedge fund managers in South Africa have proven themselves to be more conservative than their international counterparts there are some experienced managers that have long, consistent track records to prove it. Kim Zietsman, Head: Furthermore, Business Development and hedge funds Marketing, Laurium Capital
Hedge funds have been regulated by National Treasury since 2015 as per the provisions in CISCA. The major objective of this regulation was to monitor risk to protect investors and provide investors access. Have you seen a change in the investor base since these regulations? The regulation was welcomed by the industry and gave all hedge funds an opportunity to market themselves to the public, however industry growth has been disappointing. Most assets are from a select group of pension funds and high net worth individuals. Flows up until now from retail investors directly and via advisors has
“To label all hedge funds (and hedge fund managers) as high risk is misleading” been negligible, but we are seeing a renewed interest in hedge funds, which is encouraging. Why do you think hedge fund assets in SA remain small relative to CIS industry assets of almost R3tn? • Until hedge funds were regulated by CISCA, and converted into CIS funds like ours were in 2016, they were not allowed to be marketed to the public • Not being widely available to retail investors via LISPs, which are the primary channels used by financial advisors • Some hedge fund managers, like Laurium Capital, have moved their hedge funds from monthly pricing and dealing to daily pricing and dealing, which means they can now be added onto LISP platforms and included in model portfolios, etc • BN 90 still restricts CIS funds from investing in HFs, even though Reg 28 allows for a 10% allocation to hedge funds • Financial advisers require a specific license to sell hedge funds to their clients Hedge funds are not well understood, more complicated than long-only strategies, and there are many misconceptions about hedge funds.
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