hedge funds fact and fiction Piet Viljoen RE-CM

Transcription

1 hedge funds fact and fiction Piet Viljoen RE-CM

2 agenda a short history how the market has developed d value for money? what to look for sensible alternatives

3 a short history Alfred Winslow Jones, 1949 by mid 1960 s 140 funds 1970 s bear market, only 64 funds left Robertson, Soros, Steinhardt by late 2000 s over 6000 funds

4 recent spectacular failures and in SA Evercrest and Spyglass

5 with the pinnacle.

6 earlier this year new record for hedge fund failures Anita Raghavan, , 09:30 AM EDT 1,471 hedge funds went out of business in 2008 It's official: 778 hedge funds liquidated in the fourth quarter, more than doubling the previous record of 344, set only a quarter earlier, according to Hedge Fund Research, a Chicago firm that tracks movements in the industry. For the year, 1,471 hedge funds, which are lightly regulated investment pools catering to wealthy investors, closed shop, a 70% rise from the previous full- year record of 848 set in source : Forbes.com

7 why has the market developed the way it has? return benefits diversification ifi benefits manager benefits superhero + magic box = marketing benefits

8 return and diversification benefits source : Gaurav S. Amin*,Harry M. Kat** Working Paper, April 29, 2002

9 manager benefits average fee structures: t long only 1% - 2% p.a. + highly regulated banks earn RoA of around 1% + highly regulated hedge 2% p.a. plus performance fee + lightly regulated

10 so, what are hedge funds really all about? SocGen Bankers quit to set up hedge fund Thirty senior bankers from Societe Generale s alternative asset management team have left to set up their own hedge fund amid growing pressures at French banks to curtail the bonuses of top employees. By Sam Jones, London source: from the Financial Times, Wednesday September 16

11 value for money?

12 but be aware of backfill bias survivorship bias

13 backfill bias source : Hedge funds : risk and return, Malkiel and Saha

14 survivorship bias source : Hedge funds : risk and return, Malkiel and Saha

15 what to look for? long (actual) track record stable AuM single product/philosophy house demonstrable high level of ethics reasonable fees

16 simpler is better c.a.g.r. 30 Sept avg balanced fund (source:morningstar) average hedge fund (source : Clade) 10 years 7 years 5 years 3 years 1 year 15.7% 16.3% 15.2% 7.0% 7.6% N/A N/A 11.2% 6.8% 2.5% inflation 6.2% 5.9% 6.3% 8.3% 9.0%

17 conclusion most hedge funds are a triumph of marketing over reality beware of alternative remuneration schemes understand what you are investing in keep it simple as always : CAVEAT EMPTOR

18 disclaimer Regarding Capital Management (Pty) Ltd Registration No. 2004/007733/07 ( RE CM ) Regarding Capital Management ( RE CM ) is is a licensed Category I and Category II Financial Services Provider in terms of section 8 of the Financial Advisory and Intermediary Services Act 37, 2002 (licence number 18834). Accordingly, RE CM is authorised to provide advisory and/or render discretionary intermediary services. There are risks associated with investments in financial products, including market, credit & currency risks. As performance of the financial markets fluctuates and is not guaranteed, the investor may not get back the full amount invested. Past performance is not necessarily an indication of future performance. All returns are rand returns, unless otherwise stated. All performance data is calculated by RE CM unless otherwise stated. Regarding Capital Management (Pty) Ltd P O Box Claremont, 7735 South Africa Tel: (021)

19 thank you Piet Viljoen RE-CM