South African hedge funds held their ground as an attractive asset class by serving up mostly double-digit returns in 2005. Of the 24 funds polled by the Nedgroup Hedge Fund Review that reported returns for the year to November 30, 11 reported returns of more than 20% for the period, once fees were taken into account. There were eight funds that delivered less than 10%; only one lost money.
Most hedge funds aim to deliver positive returns, regardless of market conditions. They tend to underperform an ordinary share investment during bull markets, but lose little or no capital during bear markets. Therefore it is no surprise that most funds did not meet the performance of the JSE All-Share Index, which returned 34% over the same period, excluding dividends.
