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Jan 2021 Kanaan Newsletter
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Dear Client

Happy New Year to you and your family. I trust that you have had a good festive season, taking the lockdowns into account.

1.      As far as Moriah Global is concerned, it had been a good year up until the end of August, ending with 19.07% net of all fees in USD, but the fund went down badly thereafter with more than 3.52% for August, -7.02% for September, -4.95% for October and -7.27% for November, but I think we have seen the worst as the fund has grown again with almost 3% for December, namely 3.61% after fees in USD, to end the year with 1.10% in USD and 6.01% in ZAR, as you can check for yourself if you log in to your account via the webpage of our administrator IAL in Mauritius.

2.      What has happened? The effect of the COVID-19 during the first three-quarters of the year has been a no-brainer for good hedge fund managers as they knew that the direction of global markets will be downwards and they have simply short their positions, but after the surprise that vaccines (that are usually only available after 3 years) would be available this year already, as well as the uncertainty concerning when it will be available and, even worse, the uncertainty concerning the American elections, made it difficult for them to predict the direction of the markets. The markets had in fact started to grow much faster than most hedge funds managers had foreseen, but I think that the uncertainties of the American elections, as well as the availability of vaccines is now something of the past and the good growth for December, as well as the estimated growth figures that we have seen for January, are very positive.

3.      Stable Offshore FoF

The uncertainties of 2020 world-wide have caused a lot of anxiety, and with good reason, amongst many of our clients. We have therefore (for the past few months already) been working on additional strategies, referred to in our previous newsletter as Passive 1 and Active 1 up to Active 7, of which we have changed the names to make it more user-friendly. These funds of funds are different from the hedge funds of Moriah Global FoF where most of our clients' money is invested and which we still believe is the answer to most of our clients’ needs, for the medium to long term. The need to diversify (as we have done a while ago for some of our biggest clients) has been addressed by us in terms of the creation of a so-called 'Stable Offshore FoF', with less volatile underlying hedge funds, of which the HPF USD 5-year fixed deposit fund, is a good example, which has consistently been giving +/- 8% per annum over the past 5 years, as well as the Dollar version of Sphere Invest Global Credit. Where we are seeing an escalation of clients drawing their monthly income from Moriah Global FoF, we thought it is necessary to create the Stable Offshore FoF, which has now been finalized with various underlying hedge funds which do not intend to give the potential high growth of Moriah Global and not to speak of the very high potential growth of Equities Offshore FoF and Trading Offshore FoF, as mentioned and explained below, but where the STD (Standard Deviation) will also be much lower, almost like that of a savings account. The one underlying hedge fund, HPF, is a five-year fixed deposit fund, of which the CAR (Cummulative Average Rate  of Returns) now for many years, even during COVID-19, has been +/- 8% per annum in USD and the fact that the fund is fixed for five years is not problematic as we do have enough other underlying, similar hedge funds within Stable Offshore FoF to make Liquidity available to clients. The reason for setting up a FoF (Fund of Funds) is because, as you know, most of these USD funds have minimums of $100 000, which makes it difficult to diversify clients individually properly amongst at least a dozen of these stable hedge funds and further, though we have decided since the 2008 Credit Crunch not to try to time market corrections or crashes by switching to cash, we nevertheless need to cut out the dry wood from time to time that is consistently under performing and/or to add funds that are consistently out-performing, which we cannot do cost-effectively and efficiently if we have to do it for hundreds of clients individually, outside of a Fund of Fund. Another reason why we have decided (during 1995) to acquire our CAT2A license apart from our CAT1 license necessary for a FA (Financial Advisor) was to register as a DFA (Discretionary Financial Advisor) so that we would be allowed to run funds and fund of funds.

4.      Equities Offshore FoF

Our other strategy for diversification has been a selection of high-growth funds and shares like for instance, Amazon and Tesla, which have a very high CAR. Since we have started to invest a few of our younger clients, individually, during January 2019 in these high growth funds and shares, we are now happy to announce the CAR of our newly-registered Equity Offshore FoF, available now to all our clients, is 33.88% net of all fees and you will see below that the STD of 24.85% is very high and for this reason one will not allocate too much of pension money, however, more importantly, you will also notice that the down-STD is relatively low at 11.57%.

5.      Above you will notice that the funds and shares, to which some of our bigger clients have been exposed individually, are now registered as our Equities Offshore FoF which collectively have grown for 2020 with a fantastic 41.73% net of all fees, but as mentioned, we have decided never again to try to time market corrections or even market crashes, therefore, Equities Offshore FoF can grow negatively by 20% or 30% during a crash. However, there is nevertheless a place, proportionally to a client's risk profile and circumstances for Equities Offshore FoF in the portfolios of most of our clients. Why? The reason why, is because it will usually react differently from hedge funds as you can see what has happened during 2020 with Equities Offshore FoF that has grown with 41.73% in USD net of all fees compared to Moriah Global that has grown only 1.10%!

6.      Trading Offshore

A further strategy that we have started since 30 April 2019, run by Andries Van Tonder of our offices, with his own money and called Kanaan Arbitrage CTA Fund, has now a fantastic CAR of 319.85% and obviously with a very high STD of 80%. This however does not matter because  the down-STD is only 4.1%, almost like that of the money market. See below the performance record of the Arbitrage fund below. 

7.      As you can see, the fund has grown for 2020 net of all fees 141.67%.

8.      Normally I would not even consider investing my own money in a fund like that, not to speak of advising a client to invest in it. The difference now however is that Andries Van Tonder, who you may recall, is a friend of Gert's with a BSc Chemical Engineering and who has been working as a mathematics lecturer for the teacher's college at KSB mission, has also been working for us for more than 10 years doing the programming and the automation of our administration, our compliancy and our fund research. Dries has written a computer program according to which he has started to trade crypto currencies actively at least once a day since 30 April 2019 and as we know exactly what he is doing and as he has proven himself after 1.5 years, and after IAL in Mauritius have checked his credentials and methodology, they have registered for us his two funds, namely Trading Offshore and Currency Trading Offshore and I can, without hesitation, advise you to invest some of your Dollars there. Perhaps you can invest the minimum of $5 000 until you feel more confident about it.
We will start to advise our clients to invest some of their capital in the above mentioned Stable Offshore FoF, Equities Offshore FoF, Trading Offshore and Currency Offshore, according  to their risk profiles and circumstances, but you are free to contact us in the meantime if you do not want to wait for that.

9.      The trial run Dries has had with Kanaan Arbitrage CTA Fund, has been done in South Africa but as there are many more additional regulations to comply with, many more than in Mauritius, and as clients see the need to have the majority of their investments offshore, we have registered two funds in Mauritius via IAL, namely Trading Offshore, where Dries will trade offshore equities and Currency Trading Offshore, where Dries will trade crypto currencies, according to the same methodology that he has been trading Kanaan Arbitrage CTA. You would of course be able to login to view your statement at IAL in Mauritius at any of the day or night, but most of our clients prefer to ask us from time to time for the more user- friendly statement via our server.

     10.     These so-called “daily currency traded funds” have attracted negative attention over the past few years with investigations by the authorities of irregular conduct and even pyramid scheme methodologies, and in some cases, investors have lost a lot of money. In all those cases that I am aware of, the fund managers were well qualified and experienced but they had not had a FSCA qualification or license, which is not a prerequisite if you want to manage your own money and even other people can invest in your fund under certain circumstance, as long as you have not marketed your fund and the others are investing in your fund because they had become aware of your fund in terms of their own research or because they have heard of your fund from somebody else. This methodology may be legal under circumstances, but with a great danger because of the absence of the necessary checks and balances. Qualified fund managers with a FSCA license, registered in terms of the FAIS act, like a medical doctor that has to have a MB. Ch B degree, and that must be registered with the Medical and Dental Council, who may from time to time conduct an investigation so as to see whether all documentation and methodologies are practiced within the strict guidelines of the law. Registered fund managers like us, worldwide, may not allow members of the public to invest directly in their funds. The members of the public can only invest via registered administrators like IAL (International Assurance Ltd.) in Mauritius, which is a further checks and balance to prevent a greedy fund manager from putting his fingers in the till, contrary to regulations, in breach of his mandate.

Friendly greetings,

Andre


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