SA hedge fund industry assets rise 13%

Assets in South African hedge funds reached R83.2 billion in the 12 months to the end of December 2022, according to HedgeNews Africa research, increasing by 12.95% from R73.6 billion the year before.

The number includes both dollar and rand classes, as well as private debt funds that report to our database and alternative strategies housed in regulated QIF structures.

Excluding alternative QIFs, assets in South African hedge funds (dollar and rand structures) grew by 13.91% to sit at R77.7 billion as of the end of 2022, from R68.2 billion in 2021.

Alternative QIFs – which include broader alternative strategies – recorded assets of R5.43 billion, from R5.39 billion the year before.

Assets in rand-based hedge funds grew to R72.48 billion from R63.13 billion in 2021 and R56.1 billion the year before, up 14.81% year on year.

South African dollar-based strategies amounted to $311.46 million (or R5.29 billion) from $347.8 million the year before – a 10.46% decline in dollar terms (an increase of 2.85% in rand terms). This was 6.8% of the total, down from 7.54% the year before.

South African long/short equity funds (rand assets), the industry’s largest category, climbed by 14.94% to R44.02 billion from to R38.3 billion in 2021 and R30.3 billion in 2020.

Dollar assets in the strategy came in at $274.37 million, down from $325.14 million, a 15.6% decline. 

The number reflects some inflows, given that the category gained a median 6.77% in performance terms, according to the HedgeNews Africa Long/Short Equity Index.

South African fixed income, the industry’s second-biggest category, came in at R11.98 billion, an 11.89% increase from R10.7 billion the year before. The category returned a median 6.34% during the year.

Amongst market-neutral and quantitative funds, total rand/dollar assets came in at R7.09 billion up from R5.54 billion the year before, a 27.8% increase, the biggest growth by category. Rand-based assets in the strategy accounted for R6.55 billion (up 24.09%). Dollar-based assets accounted for $31.9 million (or R542.7 million). The category was also the best performing in 2022, gaining a median return of 7.81% during the year. 

Multi-strategy funds saw assets come in at R7.05 billion, up from R6.03 billion the year before, a 16.86% increase. The category returned a median 7.18% in 2022.

Private debt strategies we track accounted for assets of R2.13 billion up from R1.8 billion, a 13.8% increase on the year before.

The survey also includes R817.7 million in specialist strategies, primarily commodities strategies, from R992.57 million the year before, a 17.62% decrease on 2021 numbers.

The industry’s top five hedge fund firms manage 57.2% of total South African single-manager assets, at R44.5 billion, up from 52.29% or R35.7 billion the year before (and R30 billion in 2020). 

The top 10 hedge fund firms accounted for R51.2 billion or 65.8% of assets, up from R46.6 billion, or 68.32%, the year before.

Segregated accounts comprised 13.9% of single-manager hedge fund assets, slightly down from 16.74% the year before and 17.09% in 2020.

Fourteen firms managed hedge fund assets of more than R1 billion each (including rand and dollar classes), the same as in 2021. 

By individual fund size, 23 funds managed in excess of R1 billion, up from 17 funds the year before. Of these, the bulk were long/short equity funds (14) funds, two market-neutral strategies, two fixed income strategies and one multi-strategy. 

Of these funds, six funds had more than R3 billion under management and eight managed in excess of R2 billion. 

Our calculations show that 38.42% of South African single-manager funds (domestic and offshore) had less than R100 million under management, down from 44.09% in 2020.

Of this total, 21.05% had assets of less than R50 million, down from 22.83% the year before.

South African fund of hedge funds and multi-managed funds accounted for combined assets of R38.8 billion up from R35.2 billion in 2021, a 10.23% increase on the year before. These funds now account for 53.61% of the industry total, up from 51.62% in 2021 and 44.39% in 2020.

According to our records, three funds closed during the period, including one fund of funds, down from four closures and 15 the year before. There were five new launches during the year.

**For single-manager funds, the survey covered 76 qualified investor funds (QIFs), and 77 retail investor hedge funds (RIFs). Assets in segregated accounts were also included.

A total of 29 fund of hedge fund products were included (22 QIFs and 7 RIFs).

HedgeNews Africa takes a conservative approach to calculating assets under management. Figures used in this survey include funds listed in our database as well as those that do not list with us but have revealed their assets for the purposes of this research.

Africa-focused assets under pressure

Africa-focused mandates tracked by HedgeNews Africa accounted for assets of US$3.5 billion from $4.8 billion in 2021, a decrease of 27.41% as African markets felt the global fallout.

This comes in a year during which the HedgeNews Africa Pan Africa/AME Index declined a median -13.58% and the MSCI Frontier Markets Africa Index lost 25.85%.

The number includes equity and fixed income mandates investing in liquid markets, as well as trade finance funds, but excludes sizeable infrastructure, venture capital and private equity assets invested on the continent.

Of the total, 67.05% was invested in Africa long-only equity mandates, or $2.36 billion, down from $2.73 billion, compared with 56.27% of the total the year before.

Africa fixed income funds accounted for 27.17% of the total, or $957.9 million, down from $1.27 billion, or 26.2% of total assets, the year before. 

African commodity trade finance amounted to $203.67 million, down from $850 million the year before.