Part 1 of a 10 Part Series
This marks the start of a 10-part series, where I will distribute a chapter from my eBook on Regulated Hedge Funds to the Find an Advisor network every fortnight.
The purpose of this series, is to inform you and your clients of the 298 CISCA regulated hedge funds that are now available to both retail investors (RIHFs) and qualified investors (QIHFs), as of June 2017.
We will largely be focussed on RIHFs (Retail Investment Hedge Funds) which meet the requirements of Reg 28, exploring various alternative strategies and meeting many of the boutique fund managers along the way.
For more information, please visit my website www.blackonyx.co.za.
Have you ever considered the alternatives?
Better returns and less risk than the JSE over time.
Better returns and less risk than most unit trusts over time.
Portfolio diversification that ensures uncorrelated returns.
Active fund management that minimises downside risk.
Investor protection via FSB-regulated structures.
* I will reference these statements in more detail throughout this publication with data from fund factsheets, Minimum Disclosure Documents, Morningstar and other asset manager reports. Click here to review the source of the above statements
Lets get started …
You can download Part 1 here, a PDF file, which includes the Foreword (below), Benefits and Drawbacks of Hedge Funds and Chapter #1 – Hedge Funds 101.
Foreword
Many experienced investors are unaware of mature, tried and tested investment strategies that have been delivering greater returns than most general equities and with significantly less risk than most balanced funds* for 16 years in South Africa. The Financial Services Board (FSB) recently approved the regulation of a particular alternative investment strategy that has provided generational wealth to the ultra-wealthy for decades. Certain hedge fund structures are now regulated by the FSB and accessible via the more familiar collective investment schemes (CIS).
The recent regulation ensures that these alternative investment standards are designed for retail investors to diversify their investments and create sophisticated portfolios, ensuring greater investor protection, providing access to uncorrelated investments with superior risk-adjusted returns to most traditional investments.
So … Do you consider yourself a good investor? I’m not suggesting that you necessarily pick investments, value and time them to ensure a positive return, but do you understand exactly what you have invested in? Have you ever considered what else is available that would see you becoming a more sophisticated investor with a healthy chance of optimising your wealth with an uncorrelated portfolio? What are the ultra-wealthy doing with their investments that you can’t do yourselves?
You are probably reading this because you, like me, have a desire to become a sophisticated investor and likely invested in equities and bonds via a handful of unit trusts and retirement products. I’m certainly no expert, which is precisely why I lean into the global support I have established over many years amongst the best financial advisors, wealth planners, family offices and investment managers to identify the best fund managers and assemble them into the most efficient structures, ensuring wealth protection with the best risk-adjusted returns.
Yes, hedge funds have had a bad reputation and have disappointed many investors overseas (and some locally), but favourable returns generated by the more astute South African hedge fund managers over the past 10 years have demonstrated half the risk of the index and significantly less than mainstream equity investments over that time*.
Hedge funds are not necessarily an asset class as much as they are a wealth of investment strategies operating together to generate equity-like returns while yielding considerably less downside risk than the equity markets. Traditional investments will likely always be the bedrock of an investment portfolio; however, in the advent of accessibility to uncorrelated alternative investments (hedge funds and private equity), I believe the recent regulation of South African hedge funds is the path to portfolio diversity. Importantly, these strategies are not stand-alone and should complement one another within an existing investment portfolio.
Building wealth should be a collaborative effort, so let’s assess the risk and the rewards, pros and cons, benefits and features of regulated hedge funds available to you and me here in South Africa, whether it’s through your pension fund, retirement annuity or an individual investment strategy. I hope that I can share some alternative strategies and structures designed to both preserve and grow your wealth, hopefully for generations to come.
In preparing this document, I have carefully considered and respected the sensitivities and ambiguity around the FSB / FAIS regulations that govern me as an intermediary, specifically pertaining to reporting data and comparable advertising. For more details, please refer to Annexure A – Board Notice 92.
There is no glossary at the end, so please refer to www.investopedia.com for definitions and explanations.
You can download Part 1 here, which includes the Foreword (above), Benefits and Drawbacks of Hedge Funds and Chapter #1 – Hedge Funds 101.
Please visit www.blackonyx.co.za to contact me or for more information, or follow me on LinkedIn here for my weekly post on the boutique fund managers we represent at BLACK ONYX, or alternately follow BLACK ONYX on YouTube here or our podcasts here.
* I will reference this statement in more detail throughout this publication with data from fund factsheets, Minimum Disclosure Documents, Morningstar and other asset manager reports.
