Top South African hedge fund manager hits back at critics

Jean Pierre Verster, the founder and CEO at Protea Capital Management, responded to critics who questioned his fund’s performance and fees.

On Monday, 30 March 2026, prominent X user CJPraat posted that Verster has launched his high-risk long/short hedge fund to retail investors on the JSE.

He added that the fund’s fees are 1.25% service fee plus a 20% performance fee, with an accompanying snapshot of the fund’s performance.

It showed that the Protea Worldwide Flexible Hedge Fund significantly underperformed the JSE All Share Index over 1, 3, 5, and 7 years, and since inception.

Over the last year, the JSE All Share Index returned 54.49% while Verster’s fund only returned 15.17%.

Commentators were quick to slate the fund and its fees, questioning what justified the high fees when Verster does not outperform the market.

One critic questioned the point of a hedge fund when its drawdowns are just as severe or even worse than those of a long-only fund.

Another said that the only winner was the fund manager. “The awesome thing here is that you get to capture negative alpha for a simple 7% fee a year.”

In the world of investing, Alpha is the holy grail for fund managers and what sets the top performers apart from the rest.

It represents the excess return of an investment relative to the return of a benchmark index, like the JSE All Share Index.

Unless a fund manager can outperform the market, people can simply buy an exchange-traded fund (ETF) and enjoy better returns.

Wealth manager Joanne Baynham said that the problem with many hedge funds is their hurdle rates.

“Beating cash is their criterion for earning performance fees. It should be a higher hurdle, like beating inflation by 4%,” she said.

She argued that if the fund manager significantly outperforms inflation, investors wouldn’t mind paying the high fees.

“These hedge funds already take 1.25% of your total assets as a fee, so a hurdle rate of 7% for performance fees is rich,” another commentator said.

The table below compares the Protea Worldwide Flexible Hedge Fund’s performance with that of the JSE All Share Index.

Period	Protea Worldwide Flexible Hedge Fund	FTSE/JSE All Share Index
1 Year	15.17%	54.49%
3 Years (annualised)	10.26%	22.52%
5 Years (annualised)	10.25%	18.68%
7 Years (annualised)	10.48%	16.75%
Since Inception (annualised)	10.51%	13.17%

Jean Pierre Verster hits back at critics

Verster responded to the commentators, saying not all the comments are accurate. He explained the total expense ratio (TER) of the fund.

“The returns shown on the fund fact sheet are after fees, and the 7.42% TER for 2025 was mostly due to a 5.3% performance fee for the year (+19.4% net).”

To have the same TER for 2026, the fund will have to deliver over 19% after fees again. “If the 2026 return is less than STEFI (roughly 7%), only the 1.25% fee is payable,” he said.

He explained that for the first 9 years, the fund outperformed the JSE All Share Total Return Index on a cumulative basis.

“Only after the past year’s gold mining surge has the fund fallen behind the JSE on a cumulative basis,” Verster said.

The fund has been short gold miners, hurting its performance amid the rapid rise in gold prices.

He added that the fund is benchmark agnostic, which is very different from the Johannesburg Stock Exchange (JSE) Index.

“While we do try to outperform a 100% equity index over a full bull and bear market cycle, we also try to limit drawdowns,” he said.

This Protea Worldwide Flexible Hedge Fund has had a maximum drawdown of only -8.2% since inception, compared to the JSE’s -21.7%.

“We won’t outperform a 100% equity index every year, given our risk tolerance,” Verster explained.

The limitation on drawdowns is especially valuable to investors in a withdrawal phase.

“For young investors who can stomach high drawdowns, low-cost index funds are great, especially if held in a tax-free savings account,” he said.

However, for investors who cannot stomach such drawdowns, risk-mitigation strategies are useful.

“There are hedge funds that try to outperform a 100% equities benchmark, and therefore accept similar drawdowns, but that is not the risk appetite of this fund,” he said.