South Africa’s hedge fund industry wrapped up 2024 on a triumphant note, smashing records with a 34% surge in assets under management and double-digit net inflows for the first time ever.

According to the Association for Savings and Investment South Africa (Asisa), the sector’s assets soared to R185.12 billion (excluding fund of funds) by December 2024, driven by strong investor trust and solid performance.

The latest Asisa hedge fund statistics reveal that 221 hedge funds, managed by 12 companies, raked in a hefty R13.31 billion in net inflows over the year – more than double the R6.24 billion seen in 2023 and a massive leap from R4.54 billion in 2022. Hayden Reinders, convenor of the Asisa Hedge Funds Standing Committee, credits retail investors for leading the charge. “This is a strong vote of confidence from retail investors who recognise the important role of regulated hedge funds in mitigating market volatility within an investment portfolio,” he said. As the industry gears up to celebrate a decade of regulation in 2025 – a world-first for South Africa since 2015 – Reinders sees this as a sign of growing faith in hedge funds as a key piece of a diversified portfolio, alongside unit trusts.

The numbers revealed that the Retail Hedge Funds, open to everyday investors, pulled in a whopping R11.84 billion in 2024, while Qualified Investor Hedge Funds, aimed at high-net-worth individuals, saw a slight dip with R70 million in net outflows. Reinders attributes the retail surge to standout performance, clever marketing that’s taken the mystery out of hedge funds, and easier access. “Our industry is celebrating 10 years of hedge funds being a regulated investment product in 2025, and it is good to see retail investors increasingly trusting hedge funds as valuable building blocks,” he added. South Africa’s hedge funds fall under the Collective Investment Schemes Control Act (CISCA), split into Retail and Qualified categories since the groundbreaking 2015 regulations. This framework has built credibility, and 2024’s numbers show it’s paying off.

Breaking it down by strategy, Long Short Equity Hedge Funds topped the popularity charts. These funds, which profit from both rising and falling market prices by pairing long and short positions, drew R6.16 billion from retail investors and R479.01 million from qualified ones. Multi-Strategy Hedge Funds, blending various tactics and asset classes, came in second with R3.96 billion in retail inflows and R7.21 million from qualified investors. Fixed Income Hedge Funds, focused on interest-rate-sensitive investments, brought in R1.72 billion from retail investors but saw R535.15 million in outflows on the qualified side. The “Other” category – a catch-all for unique strategies – stayed flat for retail but lost R21.92 million from qualified investors.

Looking ahead, Reinders is optimistic about retail hedge funds keeping their momentum into 2025, but he’s less certain about the qualified space. “Flows into SA Qualified Investor Hedge Funds will likely remain muted until National Treasury finalises its review of the tax treatment of collective investment schemes, including hedge funds,” he said. That review could also clear up tax headaches and nudge the Financial Sector Conduct Authority to revisit Board Notice 90, which currently blocks long-only unit trusts from investing in hedge funds despite their regulated status.“The review will also provide much-needed tax clarity for our industry, hopefully enabling the Financial Sector Conduct Authority to dust off its review of Board Notice 90,” Reinders said. He’s also got his eye on pension funds, which got the green light in 2023 to allocate up to 10% of assets to hedge funds under Regulation 28 of the Pension Funds Act. “Most retirement funds are nowhere near the 10% maximum, which means there is plenty of room for growth,” he said, pointing to hedge funds’ consistent track record as a drawcard.

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