Kanaan Asset Managers

Comprehensive regulation of Hedge Funds

April 2014

I have mentioned in a previous Newsletter that the FSB intends to regulate South African Hedge Funds more comprehensively, similar to that of unit trusts.

Unfortunately, as mentioned previously, the FSB follows the widely held perception that hedge funds are for the rich man’s club only. It is true that most individual hedge funds do not have the necessary administration to cater for small investments and their minimums investment are usually R1m or even more.

The new regulations on fund of hedge funds, which will most likely come into effect before the end of this year, makes the minimum investment, even in a fund of hedge funds, R1m. Luckily existing clients who made initial investments lower than this will be allowed to continue with their current investments and as there is no restrictions on top ups it would not be a problem for them to make top ups as small as R10 000.

Hedge funds, which form part of the alternative asset class, which do not correlate with the other main asset classes, are important in any well-balanced, properly diversified investment portfolio.

We advise clients who want to make withdrawals from the hedge fund, to leave at least R100 000 in the account so as to keep their account open. Within a few months from now, you will have to invest at least R1m if you do not have an existing account with a hedge fund manager.

Andre Delport