The South African hedge fund industry has been on a roll over the past five years. This April, investors may have hoped their portfolios would show the resilience promised in marketing brochures – especially in the face of the steep, sudden selloff that followed US President Donald Trump’s tariff bombshell.
So how did they do?
Pretty well, all things considered — but, as with all fund comparisons, it’s more complicated than it seems.
According to the MoneyMate Performance Report for April 2025, the 75 monitored retail hedge funds returned 1.5% on average, compared to the ALSI, which returned 4.3%, and the ALSI 40, which returned 4.5%. Not exactly exciting, you might think.
What was exciting – nay, terrifying – were the swings experienced during the month. At one point, markets were down between 10% and 15%. But when you look at the month-on-month record, the net movement was relatively flat, thanks to the huge rebound by month end.
Averaging hedge fund performance on the MoneyMate list is a bit misleading, however, because it’s not value-weighted – and hedge funds vary massively in size. Most importantly, hedge funds aren’t really a distinct category: some aim for aggressive outperformance, while others prioritise limited downside and accept underperformance in exchange for lower risk.
That said, mixed and volatile markets are supposedly when hedge funds shine.
Jean Pierre Verster, founder and CEO of Protea Capital Management, agrees that more volatility usually provides good trading conditions – but it can also be a double-edged sword.
“There’s an enlarged opportunity for profit, but it’s also an enlarged opportunity for loss,” he says. “A lot depends on whether you’re right or wrong in how you try to harness this increased volatility.”
Verster says Protea’s funds usually outperform the market in volatile environments. But some hedge funds will underperform – because hedge funds are not a homogeneous group.
“When this wave of volatility arose, my view was: I could make very good decisions and boost the fund’s returns – or I could make dumb ones and destroy value,” he says.
As it happened, Verster was happy with how Protea’s funds were positioned coming into April: “So when ‘Liberation Day’ arrived and the markets fell sharply because of Trump’s tariffs, our funds also took a bit of a hit — but I chose to do very little.”
“The market recovered, and so did we. We ended April positive across all our funds. I’m generally pleased with how things played out. If I’d taken a more active approach, the result could have been either better or worse – depending on what I did.”
The tariff war was an odd trigger for a downturn, Verster notes, because it hinged on a single individual’s decisions.
“That was the problem this volatility represented. It’s exactly why I decided to do very little – because I had too little insight into what Trump might do next.”
Cy Jacobs, director and co-founder of 36ONE Asset Management (which is not exclusively a hedge fund manager), takes a different approach – but agrees on this point: “This was different because it was a man-made correction – a policy correction,” he says.
“You’re not even sure whether the policy will stick or if it was just a negotiating tactic. It wasn’t like a systemic breakdown.”
Jacobs adds that some underlying issues may have also been at play – such as the overvaluation of certain US stocks, and signs that the US economy may be hitting structural headwinds.
The gold rally
Although hedge funds didn’t have an outstanding April, their two-year returns are impressive: on average, retail hedge funds are up around 24%. However, that is squarely in line with the ALSI 40’s gain.
One of the reasons perhaps for this is gold.
Hedge funds that rode the gold rally, along with some general equity funds, have done well over this time span. Yet hedge funds typically take a bearish view of gold companies – which they see as lacking pricing power, and where cost control is always a challenge. But with gold on a long winning streak, the miners have ridden the momentum.
Still, South Africa’s hedge fund industry continues to grow. According to the most recent ASISA industry statistics, as at 31 December 2024, assets under management in the industry have now surpassed R180bn.
Despite the gut-wrenching swings, retail investors are clearly tuning in to the pitch.
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