Fairtree Hedge Fund Triples Market Return on South African Mines

  • Cape Town-based fund gains 9% in October, Up 29% in 10 months
  • Weak rand aids asset manager, bank selloff offers opportunity

Fairtree Capital Pty Ltd., a Cape Town-based hedge fund manager, outperformed the South African stock market by more than three times after betting mining shares would fall and that offshore property companies would gain from a weaker rand.

The Assegai MAP Equity Fund managed by Stephen Brown returned 8.9 percent in October for a 29 percent increase this year to the end of last month, according to the company, which has 21 billion rand ($1.46 billion) across 20 funds. The Johannesburg Stock Exchange All Share Index returned 8.1 percent in the same period.

“We’re consistently outperforming the market this year in all environments, up and down,” Fairtree Chief Executive Officer Kobus Nel said in a Nov. 13 interview in Cape Town. “While long-short equity hedge funds in other parts of the world have done poorly, we’ve had great sector and stock picking here.”

South African hedge funds are taking advantage of a commodity rout, betting that stocks in mining companies will fall as lower prices force them to shed thousands of jobs amid a slowing economy and record lows for the rand. International investors have sold out of local banks with ties to domestic miners, presenting further opportunities, Nel said.

“There’s an outflow of investment from banks and we believe that is overdone,” Nel said.

Benchmark industry has dropped in six months
Benchmark industry has dropped in six months

The Assegai fund benefits from directional bets on the market, such as declines by Sasol Ltd., the world’s biggest producer of liquid fuel from coal, and diversified miners in iron ore and platinum, Brown said in the same interview. The fund sold some offshore property stocks, to realize profits gained from the weak rand, when forecasts of an interest rate increase became more widespread, he said.

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