Concerns about the impact of fund size on the investment performance delivered by fund managers overseeing large pools of cash continue to reside in the minds of investors, especially where long only funds are concerned.
But South African stock market valuations look expensive. The recent correction in global financial markets has left developed market equities about 10% cheaper and emerging market equities 25% cheaper, removing a lot of the valuation froth that was evident.
Retail investors in South Africa will soon be able to invest in hedge funds, some of which out-performed the JSE by almost four times in the year ending 30 June 2015.
Assets under management by the South African hedge fund industry reached R62 billion on 30 June 2015, showing a 15.8% increase on the previous year, according to the Novare South African Hedge Fund Survey 2015, released today.
Novare Investments, the independent multi-manger, was recently voted the Best Multi-Manager Fund Provider in South Africa at Global Fund Awards 2015 in London.
Hedge funds come into their own in turbulent markets.
Global earnings expectations have the potential to surprise on the upside.
With the current equity market bull run about six years old, once buoyant investor sentiment has turned cautious in the wake of a significant increase in market volatility, and ahead of the expected lift-off in US interest rates.
The long awaited regulation of hedge funds in South Africa, released last week by the National Treasury and the Financial Services Board (FSB), is a positive outcome for investors and hedge fund managers alike.
Clarity on the regulation of hedge funds, referred to yesterday by Finance Minister Nhlanhla Nene in his budget speech, is expected to help the R54 billion industry meet the challenge of growing its asset base.