Hedge funds remain heavily underutilised in South Africa, despite their exceptional ability to safely diversify your investment portfolio.
The key to successful diversification is combining asset classes that have a low, or even negative, correlation with each other – which hedge funds enable seamlessly.
“The concept of diversification is vital for investors to grasp,” said Laurium Capital Head of SA Business Development and Marketing Kim Zietsman.
“The best diversifiers in a portfolio are those securities or investments that are less or even negatively correlated.”
Hedge funds are known for their low and negative correlations to traditional asset classes: cash, bonds, and equities – making them an excellent way to safely diversify your portfolio.
Hedge funds also often have low correlations to each other, as each hedge fund manager uses leverage, net exposure, and their long and short books differently.
According to ASISA, South Africa’s unit trust industry stands at R3.6 trillion. Hedge funds, however, only make up about R151 billion of this value – which equals less than 4%.
One reason for the low uptake of hedge funds is the perception that they are confusing and risky.
While hedge funds do require more investment know-how to understand, they have repeatedly and continuously proven their worth in the country.
“Within South Africa, our hedge fund industry has proven itself relatively resilient through each of the last few crises,” said Kim Zietsman.
Another reason for the low uptake in hedge funds is that they have been seen as only for the uber-wealthy investor.
This is also no longer the case in the local market, as many tried-and-tested Retail Investor Hedge Funds (RIFs) are now available for direct investment and listed on major platforms.
“This offers the person on the street access to some of the best investment minds in the country,” said Zietsman.
“With long track records, established processes, and philosophies, the experienced portfolio managers usually have their own wealth invested in the funds alongside their investors.”
Laurium Capital is one of South Africa’s leading boutique asset managers, with over R58 billion in assets under management.
It has a track record of continued success across its numerous hedge funds – which include both South African-based and US-dollar hedge funds – making Laurium Capital’s funds an excellent way to safely diversify your investment portfolio.
You can read about the strong performance of Laurium Capital’s hedge funds here.
Article from Business Tech
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