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Domestic hedge funds finding favour with SA investors

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South African retail investors are increasingly including hedge funds in their investment portfolios as they look to mitigate the effects of ongoing market volatility and high inflation, according to a report by News24.

The report cites figures from the Association of Savings and Investments South Africa (ASISA) as revealing that the country’s hedge fund sector enjoyed “unprecedented” growth of 30% over the past year, attracting ZAR5.33 billion of new money during 2022, including ZARR4.19 billion from individual or retail investors.

According to a data from HedgeNews Africa, the funds have proved their worth as a valuable source of return diversification with market neutral strategies returning on average between 4.5% and 11.5% a year over the past five years to the end of February.

Since 2015, South Africa’s retail hedge funds, which have a minimum investment of around ZAR50,000, have been regulated under the the Collective Investment Schemes Control Act (CISCA) meaning that the they must be priced daily and allow investors to withdraw their cash within a month. 

The act also imposes strict controls on a manager’s ability to borrow, or gear a fund, while investing in unlisted securities is also limited. Investors with more than ZARR1 million, can use qualified investor hedge funds, which are also regulated under the act but have no restrictions on gearing or unlisted securities.

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