Ordinary investors now able to access hedge funds
Corion Absolute Fund releases 15 year performance stats as the longest running fund of hedge funds in south Africa
Important regulatory changes have meant that retail South African investors can now include hedge funds in their portfolios; following the example of institutions and limited high net-worth individuals.
“Hedge funds can be used as part of a total investment strategy to potentially improve their risk adjusted returns,” explains David Bacher, CEO of Corion Capital. “Because hedge funds can now register retail investor funds under the Collective Investment Schemes Control Act, ordinary investors can also use hedge funds to diversify their portfolios.”
“For investors and their financial advisors, it is however critical to have enough information to be able to choose funds with the appropriate strategy for their goals and risk appetite,” says Bacher. “A verifiable track record, while no guarantee of future performance, of course, also provides insight in helping assess the quality of the fund’s management.”
Hedge funds invest in the same assets as conventional funds, such as equity, cash and property. The difference is that they are able to use derivatives, short selling, leveraging and other mechanisms to deliver positive performance in both growing and contracting markets.
“The good news for hesitant investors is that South Africa already has an established hedge fund sector with a solid track record,” says Bacher. “For example, Corion Capital’s Absolute Fund celebrates 15 years of success this year, having weathered many market cycles since it was founded in 2001, not forgetting the 2008 crisis.”
The Corion Absolute Fund – a fund of hedge funds – has over this period outperformed cash by approximately 2.9 percent per annum, and bonds by 1 percent per annum; a remarkable 136 percent and 48 percent outperformance respectively when compounded over the whole period.
Bacher says that as a fund of funds, which endeavors to back new strategies and talent, Corion Absolute has been responsible for seeding many new businesses and investment strategies. Examples include being one of Abax Investment first clients to the creation of South Africa’s first Proprietary Investors fund.
According to Bacher, the ability to deliver consistent returns even during volatile market conditions, such as South Africa has experienced for the past few years, is one of the key components of the hedge fund value proposition. Another is the fact that hedge funds represent a different asset class that promotes diversification, and so spreads risk.
“Hedge funds offer investors many benefits, and a fund of hedge funds is a good way to gain exposure to a range of different investment strategies,” he concludes.