South African hedge funds assets grew 24.9% in the year to the end of 2012, with a combination of good performance and asset inflows helping the industry reach its highest level ever, at R40.96 billion (US$4.8 billion) up from R32.7 billion at the end of 2011.
The total asset number includes all South African funds in the HedgeNews Africa database as well as those funds that do not report returns to us but which have revealed their AUMs for the purposes of this research. The survey included data from 65 fund houses managing 126 funds and 16 multi-manager companies managing 67 fund of funds. The total includes assets in segregated mandates, but excludes dollar-denominated portfolios and African funds.
Including a further US$338.6 million (R2.87 billion) in offshore dollar-based structures, South African hedge funds are now managing more than US$5 billion (US$5.17 billion), up from US$4.44 billion the previous year.
During the period under review, the HedgeNews Africa South African Composite delivered 10.54%, demonstrating that the growth has been both by performance and assets inflows.
South African managers also account for a further US$2.08 billion in African strategies and, although a small portion of this is managed by companies with significant hedge fund business, the bulk (98%) is in long-only equity strategies with the remainder in structured finance funds.
Big firms dominate
Growth in the South African industry during the year was driven predominantly by a number of the industry’s biggest brand-name funds, in keeping with global trends. The top 15 management companies now account for more than 80% of assets under management, up from 69% last year.
Long/short equity funds were the fastest growing category during the year – and also the strongest performers, with onshore assets rising 54% and a median return of 17.11% in 2012.
In addition to rand-denominated assets, offshore assets invested in South African-based managers grew strongly for another consecutive year, albeit from a low base — growing by 39.6% to US$338.6 million from US$242.5 million the year before. Long/short strategies were also the category of choice for foreign investors, accounting for 88.9% of the total dollar amount. The balance is invested in multi-strategy funds.
Offshore assets now account for 6.55% of total South African industry assets, with eight South African funds offering dollar classes catering to international investors.
Long/short still largest category
By category, assets in domestic long/short equity funds rose by 54% to reach R20.28 billion, up from R13.13 billion the year before. The category now accounts for almost 50% (49.51%) of the industry’s rand-denominated assets.
Fixed income funds were the second-fastest growing category during the year, adding 39.9% to reach R8.76 billion, up from R6.26 billion. The category now comprises 21.38% of total assets, making it second biggest strategy, with steady year-on-year growth seeing assets double since 2008, entirely from domestic investors.
Assets in market-neutral and quantitative funds fell by R1.1 billion, or 17.63%, during the year, to comprise 12.52% of AUM, or R5.13 billion.
Multi-strategy funds edged higher, adding R149 million in assets, or 2.82%, to reach R5.45 billion, or 13.31% of the industry’s total, remaining below a high of R5.93 billion for the strategy in 2008.
A further R1.34 billion is invested in other strategies, down from R1.8 billion the year before, including credit, real estate and CTA funds.
Of the total rand-based assets, 22.6% is managed in segregated accounts, down from 25.7% in 2011.
Fund of funds make progress
Assets in domestic fund of funds, the biggest investors in the South African industry, accounted for R26.4 billion, comprising 64.5% of total rand-based industry assets – the same percentage of the total as the year before. This is a 25% increase from R21.1 billion in 2011, although last year’s total excluded two major participants, putting the year-on-year gain at closer to an estimated 15%. Four companies saw notable growth during the year.
South African fund of funds achieved a median return of 11.25% in 2012, indicating that growth was both by performance and asset inflows.
Despite good growth in assets, it was the quietest year for launches and closures since HedgeNews Africa records began in 2009.
In the South African space, eight new single-manager funds came to market during the year, including three multi-strategy funds and three long/short equity funds. Three of the launches were new mandates from established hedge fund houses.
By contrast, eight funds closed across a range of strategies, according to our records, including three equity long/short funds and two market-neutral strategies. Six of these closures comprised the main business of the management companies.
The numbers compare with 16 South African single-manager launches in 2011 and three single-manager closures.
In South Africa there are now 15 management companies with hedge fund assets under management of more than R1 billion, up from 11 in 2011 – accounting for more than 80% (81.7%) of assets under management, up from 69% of last year’s AUM. A further four firms have AUM of more than R900 million. All of these offer more than one hedge fund product. Four houses have hedge fund assets under management of more than R3 billion.
Eight individual funds comprise assets of more than R1 billion each, up from seven funds last year, all either long/short or multi-strategy funds. Two individual funds have assets over R2 billion.
According to our records, 27% of South African single-manager funds had less than R50 million under management, down from 35% the year before. Around 13% of these comprised the main business of the management firm.
There has been a move from South African hedge fund houses to extend their offerings into the long-only space, with 20 houses reporting long-only assets. The number includes five listed institutions, namely Old Mutual, Investec, Coronation, Sanlam and Cadiz. Total long-only assets excluding listed institutions amounts to R99 billion, with 80% of these assets managed by just two companies.
South African-based managers also advise on five global mandates, with total AUM of just US$138 million.
HedgeNews Africa takes a conservative approach to calculating total assets under management, preferring to err on the side of caution.
AFRICAN ASSETS RESURGENT WITH 29% GROWTH IN 2012
Assets in African funds tracked by HedgeNews Africa rose to US$4.59 billion up from US$3.6 billion, reflecting growth of 29% over the 12-month period.
The HedgeNews Africa Pan Africa/AME index delivered a median 27.4% during 2012, illustrating that most of the year’s growth in assets can be attributed to good performance as African markets rebounded after a dismal 2011.
The bulk of the assets are in long-only funds, with around US$300 million in other strategies including hedge mandates and trade finance funds.
The number excludes a handful of below-the-radar managers, including Blakeney Asset Management, which is believed to have more than US$1 billion under management.
Four new Africa funds launched in 2012, with no fund closures on record.
Specialist Africa fund of funds (of which there are only three on record) reported assets of just US$16.4 million with one MENA fund of fund managing US$16.6 million. The number excludes at least one sizeable fund of funds, which remains below the radar. Copyright. HedgeNews Africa – April 2013.