The Bond Exchange of South Africa (BESA) and Clade Investment Management have created a new index for the SA hedge fund industry.
The purpose of the index, named The South African Hedge Fund Index, is to provide asset managers and investors with a sound benchmark for assessing individual hedge funds, and by which they can also compare hedge funds with other asset managers.
BESA and Clade Investment Management have put in place various measures to ensure the index is truly representative of the sector and that information used to compose the index is accurate. Several criteria have to be met by a hedge fund before it is included in the index's universe. It must have at least R30 million in assets and be open to further investment. Its administration, too, must be carried out by an independent third party to make sure its assets, and the performance they indicate, have been soundly evaluated.
There are different opinions as to what constitutes a hedge fund. Fifty funds presently meet the definition used by BESA and Clade (up from only 30 in mid-2004). Only 20, however, have been eligible for the index. The assets deployed by those 20 funds total R4.5 billion.
The index is based to March 2004, and updated monthly. By 31 July 2006 it stood at 151. BESA and Clade Investment Management will be holding briefing sessions on 15 August (Johannesburg) and 17 August (Cape Town) to formally launch this new index to the market. The index will be operational from 15 August 2006.
The hedge fund sector operates across all securities markets. By contrast, BESA has so far served only the interest-rate market with trade-capturing systems, by listing bonds and a diversity of corporate debt, and by providing useful information in the form of yield curves and indices. The South African Hedge Fund Index will be its first association with the equities market.
'True,' comments BESA's CEO, Garth Greubel: 'But it is an indirect one. We have formed this partnership with Clade because our core aim is to build better markets. The number of hedge funds in South Africa has been growing rapidly over the past four years, but it remains an industry with limited transparency. BESA decided that it would fit in with our prime purpose to help create and maintain this independent index since it will provide investors with a credible measure of this sector's performance over time, and hedge fund managers with a benchmark for their own performances.