South African hedge fund turned R1 million into R130 million

Peregrine Capital’s High Growth H4 QI Hedge Fund, which has a fund size of R5.98 billion, showed incredible growth since its inception on 1 February 2000.

Its fact sheet for 31 January 2023 revealed that the hedge fund enjoyed a cumulative return of 13,147% since inception – an annualised return of 23.67%.

Peregrine Capital explained that the goal of its high-growth fund is to create long-term wealth for investors by investing in their best investment ideas.

“The fund aims to deliver industry-leading long-term investment growth for our investors while assuming moderate levels of risk,” the asset manager said.

The historic risk indicators of the high-growth fund are similar to those of traditional South African balanced funds.

Peregrine Capital’s High Growth H4 QI Hedge Fund can invest in a range of assets, such as local and international listed shares, bonds and property, cash, and cash equivalents.

The fund managers look for undervalued securities that offer strong upside potential over the medium to longer term.

In addition to investing in equities, the fund can also invest in other assets, such as listed property and bonds.

“By actively managing the fund’s exposure to these different asset classes, we seek to enhance long-term returns while managing the overall level of risk,” Peregrine Capital said.

The Peregrine hedge fund outperformed benchmarks like SA Multi AssetHigh Equity Category, and the FTSE/JSE Capped SWIX All Share Index tenfold.

Peregrine Capital CEO explains their advantage

Peregrine Capital CEO and portfolio manager Jacques Conradie told Biznews their wider toolset, including being able to short shares and derivatives, helped with their strong performance.

“We try to achieve a similar job than a long-only investment fund, but with a few additional tools at our disposal,” he said.

He said when the market performs poorly, they want to perform better than equity and balanced funds.

The trade-off is that a hedge fund finds it challenging to match the returns of an equity fund in a strong bull market.

However, in years when the market is down 10% or 20%, a hedge fund typically outperforms an equity fund.

“Through the cycle, it adds up to use significantly outperforming the market or the balanced fund category,” Conradie said.

“The time when a hedge fund really shines for investors is in flat or down markets.”

Conradie said their high-growth hedge fund turned R1 million into R130 million since inception, while their pure hedge fund returned R70 million.

“The interesting thing is that the pure hedge fund returns have been achieved without ever having a negative year,” he said.

He said there are very few hedge funds, locally or globally, which returned 75 times the money without ever having a down year.