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Tuesday, 28 February 2012 - 20:00
Charts
Hedge funds - The Alternative Asset Class
In the minds of most investors the word hedge fund doesn’t inspire confidence. Hedge funds unfortunately have a bad reputation, which is mostly due to the sensational headlines that get published about some of the offshore funds that went bust. The news stream is one way as legislation prohibits hedge funds from marketing themselves in South Africa.
South Africa’s first hedge fund was started in 1998 due to demand from institutional pension funds that wanted an asset class that would be able to provide a stable cash plus return that wasn’t highly correlated with the markets. This is still the overall objective of most of the SA based hedge funds.
Hedge funds have a few additional tools available that long only and unit trust managers don’t have. Hedge fund managers are able to short instruments (sell assets they’ve borrowed) and use leverage (invest more than R100 for each R100 contributed). If a manager believes that the share will increase in value he will buy it, and sell it when he believes that the share has reached its fair value. If the manager believes that a share is overpriced he will short it, i.e. he will borrow the share and then sell it. After the share has gone down in value he will buy it back at the lower price and return it to the institution that he borrowed it from at a profit. If the share price goes up he’ll make a loss.
The graph below shows how the same fund manager was able to unlock additional returns by correctly deploying these tools.
The blue line shows the cumulative return of a unit trust and the red line the cumulative return of a hedge fund managed by the same manager. The funds have the same investment strategy and process, with the major difference being that the manager is able to make use of shorting and leveraging in the hedge fund.
As with unit trusts you get different types of hedge funds. The three main strategies employed are Long Short, Market Neutral, and Fixed Income. Long Short funds try to profit by buying companies that they like and shorting those that they don’t. Market Neutral funds aim to remove the market risk from funds, by pairing long and short positions. Fixed Income funds make use of fixed income instrument like bonds, interest rate swaps, interest rate futures, etc.
The table below shows how hedge fund returns compare to other indices. The returns of this hedge fund index are compiled by a local asset manager of hedge funds that partake in their monthly survey. The returns are cumulative until the end of January 2012.
The hedge fund strategies might not outperform the ALSI over all periods, but are more consistent in their returns. From the graph below you can see that over a 5 year period hedge funds were able to provide comparable returns to the ALSI at a much lower risk levels.
There are some drawbacks to hedge funds. Hedge funds are not FSB approved, but hedge fund managers must have an FSB Category IIB license to manage a hedge fund. The fund managers try to overcome this hurdle by providing transparency in their dealings, independent custodians, administrators, and compliance. The entry point for hedge funds is higher than unit trusts as the minimum investment is generally R1m. Most hedge funds trade on a monthly basis and might have notice periods for disinvestments.
Hedge funds aren’t suitable for every investor, but can provide an excellent building block in your asset allocation. Hedge funds are not highly correlated with other assets. They provide more stable returns than most asset classes and are able to provide some capital protection in bear markets.
Kind regards,
Gerbrandt Kruger
info@seedinvestments.co.za
www.seedinvestments.co.za
021 9144 966
Top News
![[IMAGE]](http://www.sharenet.co.za/v3/image.php?width=300&height=150&cropratio=2:1&image=/newsimages/2012-02-28T163227Z_1_AJOE81R19Y600_RTROPTP_3_OZABS-IMPLATS-20120228.JPG "Protesting miners and residents throw rocks at police near Impala Platinum's Rustenburg mine") Impala Platinum, the world's second-largest platinum producer, said on Tuesday the costs of an illegal strike at its key Rustenburg operation in South Africa have reached 100,000 ounces and a loss of income of 2 billion rand. Full story ![[IMAGE]](image.php@width=300&height=150&cropratio=2%253A1&image=%252Fnews_images_sn%252F1317717632.jpg "Man walks past the Johannesburg stock exchange offices in Sandton") South African stocks rose on Tuesday, reversing the previous session's slump as strong results from FirstRand lifted other financials and a fall in the oil price boosted global shares and domestic miners. Full story |
 A British photographer wounded in a Syrian army bombardment of Homs was smuggled safely into neighbouring Lebanon on Tuesday, but the fate of other journalists trapped with him was unclear. Full story  The young Japanese woman clutches a beige blanket tight around her shoulders as she stares into the distance. Behind her hulks twisted metal and splintered wood left by the tsunami that devastated Ishinomaki, her hometown. Full story  Sonia Gandhi, the head of India's ruling Congress party, has travelled abroad for routine medical checks six months after undergoing surgery in the United States, a spokesman for the party said on Tuesday. Full story |
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Markets |
Gold prices rose 1
percent toward $1,800 an ounce on Tuesday on an expected
injection of cheap money from the European Central Bank,. . . Full story |
Britain's FTSE 100 crept
into positive territory on Tuesday, with miners tracking metal
prices higher as the anticipation of cheap European Central Bank
loans. . . Full story |
Stocks rose on
Tuesday as strong U.S. consumer confidence data lent
traction to Wall Street's rally, while the euro climbed ahead
of. . . Full story |
European shares edged up on
Tuesday as investors braced for the next round of the European
Central Bank's (ECB) injection of cheap cash. . . Full story | |||
U.S. stocks rose
on Tuesday on strong U.S. consumer confidence data,
but gains were capped after a report showed a drop in. . . Full story |
European shares reversed
losses and briefly turned positive again on Tuesday in choppy
trading after U.S. consumer confidence readings came in better
than expected.. . . Full story |
U.S. stocks opened little
changed on Tuesday after a report showing a sharp
drop in durable goods orders cut into upbeat sentiment a. . . Full story |
European shares rose on
Tuesday on optimism the European Central Bank's (ECB) move to
inject cheap cash would help banks manage their balance. . . Full story | ||||
SA Business |
Shares of Santam jumped over 4 percent after the South African insurer declared a special dividend and investors shrugged off an. . . Full story |
South Africa's economic growth accelerated more than expected in the fourth quarter of 2011, driven by rising consumer demand caused by. . . Full story |
South Africa plans to allocate more funds towards the construction of nuclear power plants as it aims to boost electricity supply. . . Full story |
Africa-focused miner Petra Diamonds said first half earnings fell as unrealised foreign exchange losses wiped out improved revenues earned from a. . . Full story | |||
South Africa's maize output is likely to rise by 13 percent this year as higher prices boost plantings of the staple. . . Full story | South Africa will solicit international bids for 128 billion rand worth of train coaches and locomotives as early as next month,. . . Full story | FirstRand, South Africa's No.2 bank, reported a 26 percent rise in first-half profit on strong loan growth, and said it would. . . Full story | South Africa's FirstRand is unlikely to see a further earnings boost from improvements in bad debts, the chief financial officer of. . . Full story |
Impala Platinum, the world's second largest platinum producer, is seeking high-level talks with the Zimbabwean government which on the weekend gave it 2 weeks to surrender a 29.5 percent stake in. . . Full story | FirstRand would not want to spend more than 10 percent of its capital on new acquisitions, the chief executive of South Africa's second-largest lender said on Tuesday.. . . Full story | South Africa's rand firmed against the dollar on Tuesday, and looked set to launch another assault on a strong resistance level at 7.52 on the back of higher appetite for riskier. . . Full story |
Company News |
Shareholders are advised that the annual report for the year ended 30 September 2011 was dispatched on 28 February 2012 and. . . Full story |
Implats has previously communicated to shareholders about the illegal work stoppage at its Rustenburg mine. The strike has now entered its. . . Full story |
Shareholders are referred to the announcements dated 13 June 2011 and 19 July 2011 regarding the acquisition by AMAP's wholly owned. . . Full story |
Companies are required to publish a trading statement as soon as they are reasonably certain that the financial results for the. . . Full story | |||
Grindrod Ltd. shareholders are advised that the final results for the twelve months ended 31 December 2011, are expected to be released on 29 February 2012. Grindrod is holding a final. . . Full story |
The board of directors of Stefanutti Stocks announce the appointment Zanele Matlala as an independent non-executive director of the company and as a member of the Audit, Governance and Risk Committee. . . Full story |
According to Business Report, Afgri Poultry has been appointed as supplier to the KFC chicken chain restaurants owned by Yum. Afgri Poultry, the broiler producing and processing arm of Afgri, will. . . Full story | |||||
Company Results | Revenue grew substantially to R9.1 billion (December 2010: R6.9 billion) and gross profit grew to R3.3 billion (December 2010: R2.8 biilion).. . . Full story | Revenue for the interim period grew by 15.1% to R67.3 million (2010: R58.5 million). Trading profit increased by 14.9% to R3.2. . . Full story | Revenue increased to R4.8 billion (R4.4 billion) for the six months-ended 31 December 2011. Operating profit grew by 20% to R905. . . Full story | Revenue for the interim period ended 31 December 2011 increased to R218.6 million (2010: R160.2 million). Operating profit rose to R46.2. . . Full story |
World Markets (Spot Prices)
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The JSE Today
| Date | Adv. | Decl. | Unch. | Actives | Volume | Value | Trades | Orders |
|---|---|---|---|---|---|---|---|---|
| 28/02/2012 | 223 | 120 | 83 | 426 | 254,843,756 | R11,337,286,782 | 94726 | 2306259 |
| 27/02/2012 | 116 | 227 | 90 | 433 | 290,949,224 | R9,617,354,453 | 81534 | 2108720 |
| 24/02/2012 | 175 | 158 | 86 | 419 | 283,345,148 | R14,343,158,399 | 103811 | 2091555 |
| 23/02/2012 | 165 | 168 | 86 | 419 | 461,389,422 | R14,075,753,347 | 100485 | 2107216 |
| 22/02/2012 | 140 | 186 | 87 | 413 | 260,627,284 | R13,323,663,639 | 93501 | 1923969 |
Major Moves Up
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Major Moves Down
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New Highs
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New Lows
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Index Summary
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Click here for the Sharenet Index Summary page
Latest Consensus Changes**
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Results Expected**
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Recent Dividends**
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Ex Div**
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Upcoming AGMs**
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Stock Exchange News Service
| Date | Time | Headline |
| 28/02/2012 | 17:42 | Grand Parade Investments Limited - Swap of the GPI SPV Trust and The GPI |
| 28/02/2012 | 17:34 | DIA/DIB - Dipula - No Change Statement and Notice of Annual General Meeting |
| 28/02/2012 | 17:25 | Pinnacle - Revised Trading Statement |
| 28/02/2012 | 17:19 | BSI Steel Limited - Dealing in Securities by Directors |
| 28/02/2012 | 17:12 | Racec Group Limited - No change statement and notice of Annual |
| 28/02/2012 | 17:00 | Implats - Implats update on Illegal Strike in Rustenburg |
| 28/02/2012 | 16:45 | Taste Holdings Limited - Directors` dealings in securities |
| 28/02/2012 | 16:45 | Labat Africa Limited - Appointment of independent non-executive |
| 28/02/2012 | 16:43 | SGA/SGB - Synergy - Proposed Acquisition of Property Portfolio and Renewal Of |
| 28/02/2012 | 16:39 | Amalgamated Appliance Holdings Limited - Finalisation announcement |
| 28/02/2012 | 16:34 | BIFR1 - FirstRand Bank Limited - Listing of New Financial Instrument |
| 28/02/2012 | 16:31 | Exxaro - Trading of Exxaro Ordinary Shares on behalf of the Exxaro |
| 28/02/2012 | 16:24 | Iliad Africa Limited - Trading Statement |
| 28/02/2012 | 16:00 | London Finance & Investment Group P.L.C - Trading Statement |
| 28/02/2012 | 15:50 | Metmar Limited - Metmar secures increased trade lines |
| 28/02/2012 | 15:23 | PSG Group Limited - Donation of PSG Group Limited shares by a director |
| 28/02/2012 | 15:21 | CLN000117 - The Standard Bank Of South Africa Limited - Interest Rate |
| 28/02/2012 | 14:48 | Calgro M3 - Dealings in securities by directors |
| 28/02/2012 | 14:45 | Resilient Property Income Fund Limited - Dealing in securities by an |
| 28/02/2012 | 14:43 | FFA/FFB - Fortress Income Fund Limited - Dealing in securities by company |
| 28/02/2012 | 14:35 | NDP - Grindrod - Final Results |
| 28/02/2012 | 14:25 | Santam Limited - Audited abridged financial report for the year ended 31 |
| 28/02/2012 | 14:18 | Stefanutti Stocks Holdings Limited - Changes to the board as an |
| 28/02/2012 | 14:04 | Curro Holdings Limited - Reviewed group results for the financial year |
| 28/02/2012 | 13:59 | BIRP - Real People Investment Holdings (Proprietary) Limited - Interest |
| 28/02/2012 | 13:58 | Curro Holdings Limited - Declaration announcement of the Curro rights |
| 28/02/2012 | 13:00 | Poynting Holdings Limited - Unaudited condensed consolidated interim |
| 28/02/2012 | 12:52 | NAI/NAN - New Africa Investments Limited - Change in directorate by Non- |
| 28/02/2012 | 12:04 | STAN40 - Stanlib Top 40 Fund - Partial Delisting of Stanlib40 Securities |
| 28/02/2012 | 11:18 | BIIIPL - iNguza Investments (Proprietary) Limited - Listing of Tap Issue |
| 28/02/2012 | 10:33 | Massmart Holdings Limited - Trading of Massmart ordinary shares on |
| 28/02/2012 | 10:07 | Acucap Properties Limited - Dealing in securities by the company secretary |
| 28/02/2012 | 10:00 | Purple Capital Limited - Dealing in securities by directors: grant of |
| 28/02/2012 | 10:00 | ARB Holdings Limited - Renewal of cautionary announcement |
| 28/02/2012 | 09:37 | RGT Smart Market Intelligence Limited - Directors` Dealings and |
| 28/02/2012 | 09:24 | Distell Group Limited - Dealings in securities by a director |
| 28/02/2012 | 09:04 | SCIB - The Standard Bank of South Africa Limited - Issue of stock warrants |
| 28/02/2012 | 09:03 | Blackstar Group SE - TR-1: Notification of major interest in shares |
| 28/02/2012 | 09:02 | Metmar Limited - Announcement regarding related party transactions entered |
| 28/02/2012 | 09:00 | African Eagle Resources Plc - Mokambo Exploration Update |
| 28/02/2012 | 09:00 | ZCI Limited - Cautionary announcement |
| 28/02/2012 | 08:07 | RBPlat - Audited Abridged Results for the year ended 31 December 2011 |
| 28/02/2012 | 08:00 | FSR/FSRP - FirstRand - Unaudited Interim Results and Cash Dividend |
| 28/02/2012 | 08:00 | ESR - Esorfranki Limited - Further cautionary announcement |
| 28/02/2012 | 07:10 | Anglo American plc - Treasury Shares - Transfers |
| 28/02/2012 | 07:10 | British American Tobacco p.l.c - Transaction in own shares |
| 28/02/2012 | 07:10 | SYN903 - Synthesis Funding Limited - New Financial Instrument Listing |
| 28/02/2012 | 07:07 | GPT15 - Growthpoint Properties Limited - New Financial Instrument Listing |
| 28/02/2012 | 07:05 | South Ocean Holdings - Audited abridged results announcement for the |
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