WEST PALM BEACH, FL (HEDGECO.NET) – The product development head at SYmmETRY Multi-Manager’s firm, Kyle Hulett, has told conferees at the Hedge Funds World Africa 2004 conference in Cape Town SouthAfrica that the South African hedge fund industry may be facing a bubble due to the exponential growth seen in the industry in recent years. Hulett asked the question, “Is there too much capital?Will it pop?” Hulett said a good argument could be made on both sides of such questions.
According to him, five years ago there were very few hedge funds in South Africa, today Hulett said there are over 60 hedge fund companies doing business in South Africa. He contends that the South African hedge fund industry is no longer a young industry, and could not be classified any longer as an emerging industry. Hulett described the industry as ‘developed and sophisticated’, but he worries that there has been a steady decline in the amount of alpha posted by such portfolios, above the returns posted by benchmarks.
Hulett said, “People are wary of hedge funds, there are a lot of fund managers coming out of engineering and IT backgrounds and earning their school fees,” according to him, adding, “It is possible we could have “blow ups” in South Africa”.
Hulett also pointed at another concern facing the South African hedge funds; there are significant concentrations of assets in few hedge fund managers. Three of the largest hedge fund managers in the country are returning money back to investors because these managers have grown too big.
On the other hand, smaller hedge fund managers with lots of talents are not gaining investor assets because most of the investors are pursuing the big hedge fund managers. Hulett also noted that about 15% of the South African hedge funds are closing, compared to 5% internationally.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net
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