What are hedge funds? Hedge funds are investment vehicles designed to deliver absolute performance returns regardless of market conditions. Unlike traditional investments, hedge funds use a variety of investment strategies to enhance returns and reduce risk. The flexibility allows managers of hedge funds to capture market opportunities that other managers of traditional investment portfolios may not have the strategies or tools to exploit, resulting in steady return profiles.
In a shrinking SA economy with companies’ de-listings off the Johannesburg Stock Exchange (JSE) and with outflows of money to foreign markets, the South African economy is becoming very concentrated. By using hedge funds, which are becoming increasingly popular in South Africa, hedge fund managers can use a wider toolkit to exploit opportunity in both rising and falling markets whilst focusing on downside protection in portfolios.
Key benefits of hedge funds
- Increased flexibility: The value of hedge funds lies in their flexibility and broad toolkit. Hedge funds managers have greater freedom compared to traditional asset managers, allowing them to implement multitude of strategies to capture positive returns in local and offshore markets.
- Downside protection: Hedge funds are designed to offer protection by helping to cushion the blow when traditional investments suffer, particularly during sharp market corrections. Hedge funds offer defensive capabilities during times of uncertainty, particularly during times of significant broad-based decline across most assets classes as experienced during the 2020 Covid-19 pandemic.
- Uncorrelated Returns: Hedge Funds can generate returns independent of broader market movements makes them valuable in a diversified investment portfolio.
- Absolute return mindset: Hedge funds are not benchmark cognisant like traditional asset managers. The ability to provide absolute returns with less volatility makes hedge funds a compelling complementary proposition to an overall investment strategy.
With the right guidance, investors with the guidance of their Wealth Manager, can confidently explore the diverse and dynamic world if hedge funds, knowing that their investments are in capable hands. Resolute Wealth Management offers clients access to two elite hedge fund portfolios namely the RWM Defensive Hedge Portfolio and the RWM Alternative Portfolio. Each portfolio has its own investment objective which are summarised in below illustration.
