PRETORIA, South Africa (HedgeWorld.com)–Education, additional regulation and transparency may be some of what’s holding back the South African hedge fund market, especially when it comes to wooing pension funds, according to a recent survey.
Conducted by the Department of Financial Management at the University of Pretoria and commissioned by SEI Investments South Africa, the research shows that 40% of South African retirement funds already are investing in offshore hedge funds, while 60% said that they haven’t considered doing so.
The university polled 41 randomly selected retirement fund trustees that represent 87 retirement funds with assets totaling R158 billion (US$21.6 billion). According to researchers, the universe they interviewed represents about 28% of the South African retirement fund market.
What they found was that of those pension funds already invested in hedge funds, 62% said they would consider using them in the future but were prevented from further investment due to their funds’ current investment strategy, lack of knowledge or limitations in the existing pension fund regulations and a lack of suitable funds from which to choose.
Much of that may have to do with the current legislative demands. Legislation in the works is expected to register funds of funds and to allow them to be offered to retail investors, while South African hedge funds would continue to be sold to private sophisticated investors only.
Officials at Bank of Bermuda and Cape Town, South Africa-based Investment Data Services hope that legislation would be forthcoming by year-end and that likely will be similar to laws in other countries that have started to offer hedge funds as of late, such as Singapore and Hong Kong. The Hamilton, Bermuda-based administrator inked a deal with IDS last month Previous HedgeWorld Story.
A majority of the fund trustees polled (68%) said that their knowledge of hedge funds was poor or average, and 59% said they relied mostly on the financial press to get information on hedge funds rather than investment consultants and direct marketing sources.