By: Emma Pretorius Head of Investor Relations, Amplify
With the 2023 Rugby World Cup kicking off today, everyone is anxious to see how our beloved Boks perform. While we don’t know who will win, the evidence is fairly conclusive that World Cups don’t tend to be won by the tournament’s most potent and prolific sides. Saving one’s side from a sure try has just as much value as scoring one. The Springboks have taken home many trophies through their valiant defensive efforts. It’s much the same in investing – it’s not only about what you make, but also about what you keep, head of investor relations for Amplify, Emma Pretorius says.
In the dynamic world of investments, hedge funds have emerged as crucial players, analogous to a team’s formidable defence on the rugby field. A resurgence in hedge fund interest has been sparked by factors such as increased accessibility and the uncertain equity landscape. This resurgence prompts investors to rethink their gameplan and consider incorporating hedge funds into their strategies.
The strong performance and unique strategies offered by Amplify Investment Partners’ hedge funds have enabled it to grow hedge fund assets from R1.4bn to R4.5bn in almost four years, head of investor relations for Amplify, Emma Pretorius says.
“We strongly believe you need to blend hedge funds, as a lot of the risks associated with hedge funds can be mitigated by blending. Our funds range from cautious to aggressive, from long-short equity to fixed income and multi asset, enabling us to provide investors with a one-stop shop,” she says.
The funds all have different strategies, play on different parts of the yield curve and have low correlation to each other, which makes them ideal for blending.
Hedge funds are providing significant protection as markets become increasingly volatile. Most investors were expecting rampant inflation and recession in major global markets just a short while ago, only to find that they have to quickly rethink their strategies and positioning. Risk management has become increasingly challenging for fund managers as volatility only seems to increase with geopolitical events and swings in inflation, interest rates and economic growth.
Hedge funds can help to smooth the ride. Adding hedge funds to a portfolio provides investors with exposure to uncorrelated returns to traditional equity or bond portfolios, and with reduced risk. With the ability to take long and short positions, and use derivatives, hedge fund managers have additional capabilities to enhance defensive play, to keep the risk low, to not lose, and to be in the position to go for the try.
Amplify’s hedge fund range includes a cautious range of four fixed income funds as well as a market neutral fund with low correlation to each other as well as market indices such as the ALSI and ALBI and various Association for Savings and Investment South Africa (ASISA) categories, which would make this blend a perfect complement to a traditional portfolio. Pretorius says the cautious blend presents less risk than the ASISA MA Low Equity category, but basically double the returns. It has comfortably outperformed CPI plus 3% and plus 4% and has experienced significantly less drawdowns than low and medium equity category averages.
By reducing portfolio volatility and mitigating large portfolio drawdowns, you need to work significantly less than the investor whose portfolio suffers large losses and consequently has to work exponentially harder to simply break even. To put it concisely, you are winning by not losing.
*Sanlam Collective Investments
AMPLIFY INVESTMENT PARTNERS (PTY) LTD IS AN AUTHORISED FINANCIAL SERVICES PROVIDER (FSP 712).
Sanlam Collective Investments (RF) (Pty) Ltd (“SCI”) is a registered and approved Manager in terms of the Collective Investment Schemes Control Act. Collective investment schemes are generally medium- to long-term investments. Past performance is not necessarily a guide to future performance, and the value of investments/units /unit trusts may go down as well as up. A schedule of fees and charges and maximum commissions is available from the Manager on request. Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. The Manager does not provide any guarantee with respect to either the capital or the return of a portfolio. The manager has the right to close the portfolio to new investors in order to manage it more efficiently in accordance with its mandate. Income funds derive their income primarily from interest-bearing instruments. The yield is current and is calculated on a daily basis. If the fund holds assets in foreign countries, it could be exposed to the following risks regarding potential constraints on liquidity and the repatriation of funds: macro-economic, political, foreign exchange. The Manager retails full legal responsibility for the co-brand portfolios. Collective investments are calculated on a net asset value basis, which is the total market value of all assets in the portfolio including any income accruals and less any deductible expenses such as audit fees, brokerage and service fees. Forward pricing is used. Performance is based on NAV to NAV calculations with income reinvestments done on the ex-div date. Performance is calculated for the portfolio and the individual investor performance may differ as a result of initial fees, actual investment date, date of reinvestment and dividend withholding tax.