Against a backdrop of volatility in both the global and domestic capital markets, the latest Novare hedge fund survey shows that after two successive years of steady decline, the industry AUM has increased to R52.8 billion during the 12-month period to end-2019, constituting growth of 12%.
The 2019 Novare Hedge Fund Survey elicited a record response from more than 70 South African hedge fund managers who collectively manage 130 uniquely mandated hedge funds and represent 75.8% of the total hedge fund industry assets under management (AUM).
The survey focused solely on single-manager, South African-domiciled, rand-denominated hedge funds that invest predominantly in South African financial markets.
Key insights highlighted in the survey are as follows:
- Growth in industry assets
- Large asset managers led the way
Large asset managers with hedge fund investment capability and AUM of over R100 billion saw a relatively high growth in hedge fund assets, followed by those with assets between R500 million and R1 billion.
- Equity long/short funds outperformed other strategies
Equity long/short funds outperformed other strategies and managed to protect capital during market drawdowns. This strategy nevertheless experienced a greater loss in assets, reducing its industry weight by 14%.
- Fixed income strategies maintained absolute returns
Fixed income strategies maintained absolute returns throughout the period, continuing on its steady path of consistent performance since 2016 and yielding an increase in returns of 4%; from 15% in 2018 to 19% in 2019.
- Positive performance all round
In general, the industry performance was positive across all categories in terms of asset size and strategies. Large managers with AUM in excess of R2 billion, once again posted the highest returns, followed by hedge funds with AUM of between R500 million and R1 billion.
- Increased capacity
More capacity is available as most funds are still below their asset peaks seen in prior years. It can be assumed that this is because of the large outflows experienced by the industry from 2017 to 2018.
- Emergence of co-investments
The emergence of co-investments adds another dimension to hedge fund investing and presents a new and exciting opportunity, especially at 7.2% of assets, which is slightly higher than retail allocators.
- High-net-worth individuals remain at the top
High-net-worth individuals remain the most significant allocators in the industry.
The complete 2019 Novare Hedge Fund Survey can be accessed at: https://novare.com/wp-content/uploads/Novare-Hedge-Fund-Survey-2019.pdf