We aim to be financial planners who know how to help you get you the life you deserve. With our experience, know-how, and personalised approach, we can help you plan towards the life and wealth that you desire. From your individual financial needs to that of your family and business requirements, we cover the full spectrum of financial planning.
This means that we have a diverse and specialist knowledge of risk and investment products. Over the last few weeks we’ve focussed on hedge funds and this blog is specifically written to share information regarding hedge funds in South Africa.
One of the main areas that interests us is that within regulation 28 of the Pensions Fund Act, you are allowed a 10% allocation to hedge funds within your retirement annuity. As a long-term investment strategy, retirement funding (or financial independence) is a foundational part of almost every financial plan, knowing how hedge funds play into this and the relative performance is helpful when making your choices.
In South Africa, performance statistics for individual hedge funds are difficult to obtain, as the funds have historically not been required to report their performance publicly. However, summaries of individual hedge fund performance are occasionally available in industry journals and databases and we keep an ear to the ground to monitor fund performance and estimate return histories.
One of the estimates that we’ve worked with is that the average hedge fund returned 11.4% per year, representing a 6.7% return above overall market performance before fees, based on performance data from over 8000 hedge funds.
Hedge fund performance is measured by comparing their returns to an estimate of their risk. New performance measures have been introduced that attempt to address some of the theoretical concerns with traditional indicators, including modified Sharpe ratios; the Omega ratio; Alternative Investments Risk Adjusted Performance (AIRAP); and Kappa. The funds and managers with whom we work use the latest indicators and performance measures.
Hedge fund indices are complex and tricky to monitor as the typical hedge fund is not traded on an exchange. Hedge funds will accept investments only at the discretion of the manager, and do not have an obligation to publish returns. This is why, as with all of your investing decisions, it’s helpful and beneficial to work with professional planners who can focus on helping you get you the life you deserve by aligning you with the right strategies and financial products.