When Steinhoff’s share price collapsed in December, South Africa was shooketh; how could a multinational company, with roots set firmly in the country, let us down like that?
Since then, the company has been rocked by scandal after scandal, orchestrated in part by one Markus Jooste, who has been cooking the books since 2014.
Now it appears that Steinhoff has claimed the life of at least one hedge fund, which elected to close “after it ended the month 32,8% lower,” reports Business Day:
Kaizen Asset Management had decided to “wind down” its strategic-opportunities hedge fund as a result of underperformance and a reduction in assets to an “unsustainably low level”.
“The Steinhoff scandal had a material, negative impact on the portfolio’s performance in December, given that it was one of our high-conviction positions,” Kaizen, which has since closed its doors altogether, said in a note to investors.
Hedge funds differ from regular, long-only equity funds; they use a range of tools – such as shortening which is basically betting on a stock price to fall – to “limit risk and reduce correlation to equity and bond markets”:
These funds are able to gear positions in their portfolios (inject debt), which can magnify losses if not properly managed. The Kaizen fund in question ended 29.6% lower in 2017 versus the top 40’s 19.5% climb.
But the Steinhoff saga wasn’t the only short-call that affected asset managers in December: portfolios that wrongly called the ANC’s elective-conference outcome by, for example, shorting the rand or banking stocks, also took a beating.
However, Kaizen is the only asset manager that, thanks to Steinhoff, has shut down entirely:
The Financial Services Board had asked all asset managers to report on losses as a result of Steinhoff and would question further where losses had been significant, said Da Silva, who is the board’s deputy executive officer for financial advisory and intermediary services.
Sheesh – makes you wonder about your retirement money, right?
Sure, investing in a hedge fund requires big money, but if you’re new to the game it’s imperative that you seek outside financial guidance to ensure that the portfolio you are investing in is worth it. Especially when it has all the trappings of respectability, such as a name like Steinhoff.
Consequence Private Wealth mixes unit trust funds, hedge funds and share portfolios to get the most out of your money. In addition, their expertise in both local and offshore investing blends together carefully selected fund managers with proven track records, to reflect the best of the best when it comes to market views.
Sounds way better than going in blind – contact them here for more information.
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