South Africa’s hedge funds will soon be subject to new rules in an effort to help assets under management that have been encountering a dive for too long. In January 2020, there will be new categories for funds as well as definition of where the funds are. These two initiatives will help local investors make better comparisons before deciding on their hedge fund of choice. For hedge funds it will be helpful as they will only be in competition against fixed-income and long-only equity funds.
According to local hedge funds standing committee Association for Savings and Investments Chairman, Hayden Reinders:
“This is the next evolution of where we are going. We want to create awareness that a hedge fund is a different type of fund that can fit into different types of portfolios. Globally if you look at the allocation of alternatives compared to more traditional funds, alternatives can account for as much as 8% of the total. Conservatively in South Africa, the hedge fund industry could look to double.”
CEO of Protea Capital Management Jean Pierre Verster said:
“Hedge funds over the last three to five years have had a torrid time. “Now that hedge funds must formally report net performance, it isn’t this ‘fuzzy area’ anymore. Hedge funds must now get used to marketing themselves.”
Steve Binnie, CEO of Sappi said:
“An initially strong start to the year was unfortunately offset by weak graphic-paper markets and lower dissolving wood pulp prices driven by the ongoing trade wars and slower economic growth in various geographies.”
Ultimately, come January 2020, it will be much easier for the average South African in the street to compare and contrast the different hedge funds available and thereafter make the right choices for their investments. This is because there will be a new classification standard put into place.