The report cites the latest annual statistics released by the Association for Savings and Investment South Africa (Asia), as showing that the industry ended the year overseeing ZAR216nm in assets, excluding funds of funds, across 219 hedge funds managed by 13 investment firms. Assets had totalled ZAR185bn at the end of 2024.
While the sector attracted net inflows of ZAR6bn during the year, investment returns accounted for the majority of the increase in assets under management, reflecting improved market conditions across a range of asset classes.
A significant milestone for the industry was the emergence of retail hedge funds as the largest segment by assets for the first time since the country’s hedge fund regulatory framework was introduced in 2015.
Retail hedge funds represented 56.6% of total industry assets at the end of 2025, overtaking qualified investor hedge funds, which had consistently dominated the market over the previous decade. At the end of 2024, qualified investor funds still accounted for the majority of industry assets.
The shift was underpinned by investor flows. Retail hedge funds attracted net inflows of ZAR9.1bn during the year, while qualified investor funds experienced net redemptions of R4.3 billion, highlighting growing demand from individual investors seeking alternative investment strategies.
The data also revealed changing preferences across hedge fund strategies.
Multi-strategy hedge funds attracted the strongest investor demand during 2025 as market participants sought diversified portfolios capable of navigating uncertain economic conditions. Retail investors allocated a record ZAR7.5bn to multi-strategy funds, while qualified investors added a further ZAR1.1bn.
By contrast, long-short equity funds experienced notable outflows. Retail long-short equity strategies recorded net withdrawals of R1.7 billion, while qualified investor funds in the same category saw outflows of R5.6 billion.
Fixed-income hedge funds also enjoyed solid demand, particularly from retail investors, attracting R3.3 billion in net inflows. Qualified investor fixed-income funds recorded more modest inflows of R226 million.
The changing allocation trends suggest investors increasingly favoured diversified and income-oriented strategies over more directional equity-focused approaches during the year.
Looking ahead, industry participants believe proposed regulatory and tax reforms could provide additional momentum.
In its latest Budget Review, South Africa’s National Treasury reaffirmed the role of collective investment schemes, including retail hedge funds, as regulated investment vehicles that support long-term savings. Treasury also indicated it intends to introduce tax amendments designed to improve certainty for investors while encouraging greater participation in these products.
Industry representatives have welcomed the announcement, noting that clearer tax treatment could enhance the attractiveness of retail hedge funds and support continued asset growth.
Attention is also focused on potential changes to Board Notice 90, which currently restricts traditional long-only unit trust portfolios from investing in hedge funds despite both operating under the collective investment scheme framework. Market participants argue that reforming the rules could broaden access to retail hedge funds and unlock additional institutional capital for the sector.
