Examining hedge fund returns based on geography


In this paper, we answer the following question: should a South African investor invest in US hedge funds after accounting for currency risk? To reach our conclusion, we will analyse returns, Sharpe ratios and exchange rates.


In this first section, we analyse South African hedge fund performance versus US hedge fund performance. We assume that the investor is a South African national and invests in ZAR and the US investor invests in USD, thus removing any currency effects. We selected 166 South African hedge funds and 10,063 US hedge funds. There is a survivorship bias in our performance analysis, but it appears in both countries.

During the last five years, South African hedge funds outperformed US hedge funds on average by 5.22% per annum (i.e. 11.70%-6.48%).CopyrightHedgeNews Africa – March 2011.

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