INVESTING
Correcting beliefs about hedge funds one fact at a time
It is a very broad industry, which means criticising it on average is akin to knocking down a straw puppet, writes Jean Pierre Verster
I recently shared the stage with Magda Wierzycka during seminars intended to give level-headed insight into land expropriation. We attempted to separate fact from fiction. Similarly, Wierzycka’s opinion piece in Wednesday’s Business Day offers me an opportunity to respond to strongly held beliefs regarding hedge funds (Sygnia closes the book on fee-fleecing hedge funds, August 15). It is important to note that the concept of hedge funds refers to any fund that employs leverage, mostly via shorting transactions. This includes long/short funds that operate in equity, fixed income and commodity markets, whether domestic, regional or global. It is a very broad industry, which means criticising it on average is akin to knocking down a straw puppet. It is a generalisation too broad to be relevant. So, let’s tackle some of the specific criticisms: Hedge funds charge astronomical fees. The typical fee structure of a 1% basic management fee and 20% performance fee (if a cash hurdle is exceed...
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