SOUTH AFRICA 2010
SOU TH AF RI C A L E A D S
T H E HE DGE F U N D C H A RG E
STEVEN LIPTZ AND CY JACOBS, CO-FOUNDERS OF 36ONE ASSET MANAGEMENT TELL HOW THE COMPANY IS MAXIMISING ON SOUTH AFRICA’S
POTENTIAL AS A HEDGE FUND DOMICILE AND WHY THEY THINK FOREIGN INVESTORS SHOULD PLOUGH THEIR FUNDS INTO THE REGION
Steven Liptz co-founded
36ONE Asset Management in
early 2005. He graduated from
Wits and completed accounting
traineeship at Grant Thornton
International, then joined HSBC
where he was appointed as a
director. In 1999 Steven joined
Investec as portfolio manager
and ultimately as chief
operating officer.
Cy Jacobs co-founded
36ONE Asset Management in
early 2005. After graduating
from Wits Cy completed
accounting traineeship at
Grant Thornton International
and then joined HSBC where
he was appointed director.
In 1999 Cy joined Investec
where he headed the
opportunities mandate.
22 H F M W E E K . CO M
C
ompared to the rest of the world, the South
African hedge fund industry differs in a
number of respects. In South Africa, the in-
dustry is dominated by boutique asset man-
agers rather than institutions. We worked
in major institutions for most of our lives
before founding 36ONE Asset Management in Decem-
ber 2004. We started with segregated accounts in early
2005 and launched our unit trusts in September 2005.
Realising the potential of the hedge fund industry we
launched our flagship fund, the 36ONE Hedge Fund,
in April 2006. This fund has returned 20% per annum
since inception and has cur-
rent assets under management
of R1.2bn. Due to the success
of our local fund, South Africa
Alpha Capital Management
approached us to advise on an
EVEN DURING A PERIOD
offshore domiciled hedge fund
and the SA Alpha 36ONE Off-
SUCH AS 2008, WHICH
shore Portfolio was launched in
May 2008. This was followed
WAS THE WORST MARKET
by the launch of a mirror ver-
sion locally, the 36ONE Fund.
IN DECADES, SOUTH
INDUSTRY CHANGES
AFRICA’S HEDGE FUNDS
There has been major change,
particularly over the past
OUTPERFORMED THE
three years. Although regula-
tion has not yet significantly
MARKET AND THEIR
changed, it is now very much INTERNATIONAL PEERS
”
on the radar and we are likely
to see continued moves from
the regulatory point of view.
Probably the biggest move-
ment, however, is the in-
terest of investors within the funds. When
we started, investors were happy with monthly perform-
ance reports, compared to today where we provide a
lot more detailed information to our clients, who at
times require exposure, liquidity and stock-specific
information on a daily basis. The funds are very trans-
parent and monitoring by our investors (particularly
by the fund-of-funds) has changed dramatically over
the past three years. They are very aware of what we
are doing and we are almost forced to be transparent,
which I believe is a good development for the indus-
try as a whole. Our advanced technology and reporting
systems has aided this development and provides our
ASSET MANAGEMENT
investors with the standard of reporting they require.
With hedge fund strategies, I think long/short eq-
uity is particularly successful. By definition it is quite
broad and allows for a lot of flexibility. The good fund
managers are agile, nimble and are able to move within
that strategy, and we are in a market which has required
just that.
EMERGING TRENDS
There are a number of different things which we are go-
ing to see, such as continued moves to regulation. Mar-
kets are expected to be tough for the foreseeable future.
We are likely to see the growth of
private clients and the retail market
into hedge funds which has been a
small part of the market until now.
ADVICE FOR INVESTORS
South Africa is a great opportu-
nity, although I do think there is a
miss-match between the opportu-
nity and the awareness. The South
African market is quite small and
we are very focused on it. Most of
the boutique asset managers have
been involved in this market for
a number of years. We know the
market well, we are close to the
companies geographically and we
can speak to management, which
we do all the time. This allows for
ample opportunity from a risk-ad-
justed performance point of view.
There is a misconception about
the South African environment in
which we operate, but the truth is
in terms of corporate governance as an emerging mar-
ket it is are ranked among the best. Our banking sys-
tem and all of our other systems are A+ systems, and
there really is great opportunity given the skill set of
the managers and the environment. The top managers
over the past few years have performed extremely well,
particularly if you look at their performance relative to
the domestic market or to international hedge funds.
Even during a period such as 2008, which was the worst
market in decades, we saw South Africa’s hedge funds
outperforming the market and their international peers.
I would definitely tell foreign investors to invest into
South Africa. n