Absolute return funds may look like the route to safety-first investment by retirement funds; in fact, they could be the springboard for a retirement industry plunge into hedge funds.
The tip comes from Dylan Evans, Director of Institutional Investing at STANLIB, following a study of local retirement investment trends and parallels with British and European experience.
Historically, South African authorities have been cautious about hedge funds because of the perceived risks. The collapse of major US hedge funds in the late ‘90s illustrated the danger. Hedge fund managers often use derivatives and other instruments to “lock in†a favourable future. They may also leverage certain positions to maximise specific opportunities.
Despite a small number of casualties, the hedge fund concept has shown that when prudently applied it can deliver promising returns while guarding against loss through a range of sophisticated techniques.
This explains the current reappraisal by the Financial Service Board (FSB) and industry predictions that official disapproval is coming to an end.
