STEPHEN CRANSTON: Hedge fund massacre
It is time for local hedge funds to roam wider and become fully flexible in their approach
There was a time when hedge funds were seen as the glamorous alternative to old-style equity and balanced funds. They promised to provide consistent returns across the market cycle. And they strongly suggested that they would never make a loss. Now hedge funds are the junior partner to unlisted portfolios such as private equity funds, infrastructure funds and socially responsible funds. It has been much easier to package these funds as "a force for good". In contrast, hedge funds are taking multiple bets, so you might call them traders rather than investors. According to the Novare hedge fund survey there was a 9% fall in SA hedge assets over the past year to R62.3bn. Novare’s Eugene Visagie attributes this in part to what he kindly calls "meagre" performance; we might call it awful. The average long/short fund lost money, down 0.3%, but some lost 20% while a few salvaged their reputations with returns around a positive 12%. The variation in the returns of market-neutral funds was a...
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