Opalesque Roundtable South Africa 2010

8/9/2019 Opalesque Roundtable South Africa 2010

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Opalesque Round Table Series

SOUTH AFRICA

opalesque.com


2/22OPALESQUE ROUNDTABLE | SOUTH AFRICA2

Editors Note

Cover Photo: "Elephant Crossing". Picture by Matthias Knab.

Dear Reader,

Welcome to our first Opalesque 2010 Roundtable, which has a timely focus on South Africa and

the African Continent.

South Africa has a small, but well diversified, first-class hedge fund industry. You find the whole

spectrum of a fully developed sector, including administrators, prime brokers, law firms,

consultants and experienced managers.

Foreign investors often don't understand the South African landscape, the level of skill available,

or the mature capital market infrastructure and regulations. For example, having an independent

administrator, prime broker, risk manager, auditor and custodian has been the standard for hedge

funds from 2004 or 2005 onwards.

Since the global markets bottomed in March 2009, South African players have seen increased

appetite for risk and the revival of capital flows. These capital flows have increasingly arisen from

Asia and will be a significant force for development in Africa.

However, as this Roundtable discusses, Africa Investing presents itself with many challenges,

including logistics and information flows. It is critical to have teams who have the skills to

conduct on the ground research of the underlying investment opportunities. This skill set has

grown significantly over the last 15 years, and offers global investors highly attractive

opportunities.

The Opalesque SouthAfrica Roundtable was sponsored by IDS Group and took place late 2009 intheir Cape Town Office with:

Albrecht Gantz, Head of Riscura Analytics

Ian Hamilton, Founder, IDS Group

Marc Cross, Investec Prime Broking

Malungelo Zilimbola, Founder, Mazi Capital

Michael Toste, Director, Skybound Capital

Nick Middelmann, Founder, Storm Capital

Simone Lowe, Portfolio Manager, Thames River Capital

Tony Christien, Director, Investment Data Services

This Roundtable also discusses in detail the many opportunities and challenges of Africa

(frontier) investing, including detailed trade examples.

Enjoy listening in to our new 2010 South Africa Roundtable!

Matthias Knab

Director Opalesque Ltd.

[email protected]



Standing left to right: Ian Hamilton, Nick Middelmann, Marc Klein, Tony

Christien, Malungelo Zilimbola, Marc Cross, Matthias Knab

Seated: Simone Lowe, Michael Toste, Steve Brent, Albrecht Gantz

Participant Profiles


4/22OPALESQUE ROUNDTABLE | SOUTH AFRICA

I am Nick Middelmann from Storm Capital. Storm Capital is a specialist hedge fund management

company based in Cape Town with investments focused mainly on the South African equity

market.

Our flagship market neutral product, the Sapphire Fund, was started by the principals of Storm

Capital in November 2002. We launched a second product, the more aggressive Long / Short Fund,

in April 2009.

We have been managing hedge funds in South Africa for about 12 years and follow predominantly

a fundamental strategy.

Tony Christien from Investment Data Services. We are primarily hedge fund administrators but we

do specialist administration as well.

My name is Malungelo Zilimbola, I am from Mazi Capital. We have got a JV with Visio Capital

since 2006, where as a group we manage about 4.6 billion Rand. We have recently added some

long-only and corporate bond funds.

I am Marc Cross from Investec Prime Broking, and I have been part of the team since its inception.

We launched Investec Prime Broking in 2005 and our team is now 10 strong, with a presence in

both Cape Town and Johannesburg. We provide a full prime broking services to a growing number

of hedge fund clients and also help local hedge funds operating an offshore platform for their

funds. In addition we can assist our clients that want to trade international equities and see

ourselves as the entrepreneurial prime broker of choice in South Africa.

Ian Hamilton, I am head of the IDS group which Tony has already mentioned. We do hedge fund

administration, but also private equity, managed account platforms, and we also have offshore

platforms which facilitate foreign investors to invest in certain South African hedge funds.

My name is Simone Lowe. I work for a firm called Thames River Capital, a specialist asset

management firm based in the UK and founded in 1998. We run about $15 billion across 9

different groups. I am part of the Multi-Manager Alternative Group, where we run about $1.8

billion across different alternative multi-manager products. Today we employ 171 people, the

majority of these are based in the London office. I spend about 70% of my time in South Africa

and the rest in London and travelling in Africa.

My name is Michael Toste and I am a Director and Investment Strategist for Skybound Capital.

Skybound Capital is a Financial Services Board approved wealth advisory and global fundmanagement business. We are a focused team of 34 individuals based in South Africa, Mauritius,

and the United Kingdom. Our group manages 14 funds that cover a broad geographic region with

an emphasis on South Africa, Pan-Africa and Asia. Skybound Capital is uniquely positioned to

take advantage of investment opportunities in the African region and has partnered with

Companies, Investment Houses and Fund managers that have demonstrated their ability and skill

in the markets within which they operate. With regards to our Asian ventures, Skybound Capital

has recently concluded a partnership to expand its business into China. With offices in Wuhan in

the Hubei province, Skybound Capital is able to better service and research this growing market.

Throughout our group and with every investment opportunity we assess, we seek to understand the

underlying drivers of return and risk. Our guiding investment philosophy is to challenge the

Nick Middelmann

Tony Christien

Malungelo Zilimbola

Marc Cross

Ian Hamilton

Simone Lowe

Michael Toste

4

Introduction



traditional and our investment suite reflects this. Investment markets are a fine balance between

perception and reality, we seek to understand both.

I am Albrecht Gantz, head of Riscura Analytics, which forms part of the RisCura Group. RisCura is

an independent risk and investment consultant. We have offices in Cape Town, Johannesburg and

Namibia, and in 2010 we will be opening an office in London as well. I am also a member of the

South African board of AIMA.

What are some of the recent developments within the South African hedge fund

industry, or within what is called Africa investing?

The landscape for Africa Investing presents itself with many exciting opportunities to investors

where the rewards can be great. One has to pay particular attention to the factors shaping this

environment and where risks will present themselves. Foreign direct investment prior to the credit

crunch grew steadily and represented a large portion of capital flows. Since the global markets

bottomed in March 2009, we have seen increased appetite for risk and the revival of capital flows.

These capital flows have increasingly arisen from Asian investing and will be a significant force

for development in Africa. Africa Investing presents itself with many challenges, including

logistics and information flows. It is critical to have teams who have the skills to conduct on-the-

ground research of the underlying investment opportunities. This skill set has grown significantly

over the last 15 years and we continue to see this development in the region.

We place a strong focus on the developments taking place globally as we ultimately see their

impacts on regulations, market perceptions and global best practices. The new European Directive

will influence how we structure our investment products in order to cater for the needs of ourglobal investor base. Skybound Capital has structured two African Investment opportunities into

an offshore domiciled Protected Cell Company. The first is a Multi-Manager fund that has a

diversified investment base across the African continent, while the second fund is a specific

investment opportunity in Kenya, Uganda and Tanzania. We will be launching a third offshore

domiciled Africa fund in April next year to take advantage of new investment possibilities. We pay

particular attention to our investors liquidity needs, which, now more than ever, has been a

concern. For the most part, all our funds provide monthly liquidity and dealing.

RisCura has offshore, African and obviously South African clients. When comparing operational

structures and overall operational quality of those different hedge funds, I have to say that hedge

funds based in South Africa have got a much better operational control and framework, from a

separation of duties and compliance point of view at least, than those operating offshore.

Albrecht Gantz

Matthias Knab

Michael Toste

Albrecht Gantz

5

Since the global markets bottomed in March 2009, we have seen increased appetite for risk and the

revival of capital flows. These capital flows have increasingly arisen from Asian investing and will be a

significant force for development in Africa. Africa Investing presents itself with many challenges,

including logistics and information flows. It is critical to have teams who have the skills to conduct on-

the-ground research of the underlying investment opportunities. This skill set has grown significantly

over the last 15 years and we continue to see this development in the region.

Michael Toste

Hedge funds based in South Africa have got a much better operational control and framework, from a

separation of duties and compliance point of view at least, than those operating offshore.

South African hedge funds operate on more of a self-regulatory framework based on best practices,

which was set up by all the initial players within the industry here. Things like having an independent

administrator, independent prime broker, independent risk manager, you separate your auditor and

custody in South Africa this has been the standard since at least 2004 or 2005.

Albrecht Gantz



Can you give us some examples of that superiority of South African hedgefunds? Is there a better regulatory framework?

At this time, South African hedge funds operate on more of a self-regulatory framework based on

best practices, which was set up by all the initial players within the industry here. Things like

having an independent administrator, independent prime broker, independent risk manager, you

separate your auditor and custody in South Africa this has been the standard since at least 2004

or 2005.

The reason that all these standards exist is because at inception the hedge fund industry in SouthAfrica raised funds predominantly from fund of funds as opposed to from high net worth

individuals. When fund of funds were allocating money to individual fund managers, they insisted

on industry best practice at the outset. You were just not going to receive an allocation as a fund

manager if you did not have a complete suite of independent service providers, and provided full

information to your clients. Through this historical difference our industry structure is possibly

ahead of offshore hedge funds, where the industry began life the other way around.

By way of example, transparency in the South African market is fairly high. Riscura is an

independent risk management company here, and they often report daily holdings and trades of

single hedge funds to the fund of funds. Compare that to a typical offshore fund where you can

call yourself lucky if you get a weekly return from the underlying manager. The standard is mostly

just a monthly return at the moment. Even after a year like 2008, I often hear from fund of fund

managers based offshore that the only change in terms of transparency from their underlying

funds is that they now actually get to have a phone conversation with the manager, wherepreviously they were just not getting through...

I agree. Perhaps the legislators putting the EU directive together could learn a number of lessons

from the self-regulation and maturation of the South African industry

6

Matthias Knab

Albrecht Gantz

Nick Middelmann

Simone Lowe

The reason that all these standards exist is because at inception the hedge fund industry in South Africa

raised funds predominantly from fund of funds as opposed to from high net worth individuals. When fund of

funds were allocating money to individual fund managers, they insisted on industry best practice at the

outset. You were just not going to receive an allocation as a fund manager if you did not have a completesuite of independent service providers, and provided full information to your clients. Through this historical

difference our industry structure is possibly ahead of offshore hedge funds, where the industry began life

the other way around.

Nick Middelmann

The one aspect that hit a lot of hedge funds and subsequently hedge fund investors in 2008 was the liquidity

mismatches within portfolios. In South Africa, we largely did not have the same problems as our peers overseas. I

believe that a lot of our managers learned early on in their careers to manage liquidity as this has tended to ebb and

flow in South Africa. Also most managers focus on the mid and large cap equity space and have

tended to keep their strategies fairly simple. The South African market didnt require you to have to

move down the liquidity spectrum to generate returns. The transparency given to investors, meansthat the liquidity of the individual funds was being constantly monitored as well, not just by the

manager, but by their investors.

Also, there was very little side-pocketing compared to offshore. Not only from a performance point-of-

view, but also from a structural point-of-view, South African hedge funds really navigated the events

in 2008 extremely well.

Simone Lowe



Offshore we are seeing a trend of investment vehicles moving towards using a UCITS 3 structure

rather than your more traditional offshore structures. A lot of this has been borne out of the

lessons learnt last year, and investors are now putting emphasis on products with better liquidity

and more transparency. UCITS 3 products require better liquidity, more regulatory control and

oversight, amongst other things. There is no doubt that the more plain vanilla hedge fund or

alternative strategies will look into using a UCITS 3 structure. It is important to realize though, that

UCITS 3 structures are not suitable for every strategy, and that by placing a premium of liquidity,

you are probably restricting the potential for upside returns.

The one aspect that hit a lot of hedge funds and subsequently hedge fund investors in 2008 wasthe liquidity mismatches within portfolios. In South Africa, we largely did not have the same

problems as our peers overseas. I believe that a lot of our managers learned early on in their

careers to manage liquidity as this has tended to ebb and flow in South Africa. Also most

managers focus on the mid and large cap equity space and have tended to keep their strategies

fairly simple. The South African market didnt require you to have to move down the liquidity

spectrum to generate returns. The transparency given to investors, means that the liquidity of the

individual funds was being constantly monitored as well, not just by the manager, but by their

investors.

Also, there was very little side-pocketing compared to offshore. Not only from a performance

point-of-view, but also from a structural point-of-view, South African hedge funds really

navigated the events in 2008 extremely well.

You are right, but we need to be a bit careful, as there are some other outside factors that need to

be considered, like the exchange control. We were also helped by our strong financial regulations,

which for example prohibit naked short-selling. Within our framework, the market actually

remains in equilibrium, because whatever is sold short is actually available in the market. You

don't have fictitious shares being created in the market.

Our strong framework did not cause any market crisis; we also did not see an intervention from

our regulators (as it happened in most other developed markets), unreasonably banning certain

practices and restricting hedge funds for the wrong reasons. So, from an operational point of view,

we did have a very calm markets in 2008.

Maybe even more interesting, we also did not suffer big withdrawals, as the majority of our market

participants are institutional investors and not individuals who started to panic and in many cases

started pulling their money out, which exacerbated the liquidity problems within the hedge funds.

There is a trend here in South Africa that I would like to point out, namely the blurring of lines

between traditional asset managers and hedge fund managers. A lot of traditional managers moved

and are moving into the hedge fund space, and also hedge fund managers start offering long-only

products, as I our firm for example.

Ian Hamilton

Malungelo Zilimbola

7

We were also helped by our strong financial regulations, which for example prohibit naked short-selling. Within our

framework, the market actually remains in equilibrium, because whatever is sold short is actually

available in the market. You don't have fictitious shares being created in the market.

Our strong framework did not cause any market crisis; we also did not see an intervention fromour regulators (as it happened in most other developed markets), unreasonably banning certain

practices and restricting hedge funds for the wrong reasons. So, from an operational point of view,

we did have a very calm markets in 2008.

Maybe even more interesting, we also did not suffer big withdrawals.

Ian Hamilton



This is an important point. Traditionally, South African hedge funds have been housed within

niche boutiques running maybe one or two different products. There tends to be concentration at

both the product level and at the client level. What you are starting to see now is that some hedge

funds managers are starting to move into managing more traditional mandates and are starting to

diversify the products within their business. This is something that we have done at Thames River

over the years. Thames River started with one or two different products in 1998 - we now have 35

different products, 9 different asset management teams, and each single strategy manager usually

runs both a long-only portfolio and a hedge fund portfolio.

This certainly assisted our business in being able to weather the storm last year, because we were

diversified by geography, by team and by strategy. When some of the strategies were doing badly,

other strategies were doing well, and of course this has certainly been a competitive advantage for

us. The big problem in the South African hedge fund space is that we lack client diversification

and I believe that a number of players are working on addressing this.

I believe a part of this diversification is actually starting to happen through hedge funds now also

entering the long-only space. In five years time, we could see a couple of hedge fund managers

with 20 billion Rands of assets, whereas today we as one of the top and more established hedge

funds in South Africa - manage about 4.5 billion Rands assets, majority of which are hedge funds.

Is there not a conflict of between a fund manager that is running long-only and he is running

hedge funds, where he can be shorting stocks that are held in the long only portfolio. I have a

problem when it comes to the insurance houses and pension fund houses where they are running

long-only portfolios and they also are running hedge funds where they can be shorting, depressing

prices, etcetera, is to me a conflict of interest, a temptation to front run, I do not know if other

people have that view.

I do not subscribe to the idea that shorting a stock necessarily puts pressure on the price, especially

if you are borrowing the stock first as in South Africa. Firstly, you are generally shorting the top

100 stocks by market capitalisation and secondly, prices are often not set in South Africa anyway,

but rather come out of London or New York. We see that foreign flows massively influence prices

here. At times stocks can get depressed for a day or for a week or so, but over time they ultimately

will find their value.

From a conflict of interest point of view it is in the normal course of events that you could have

two fund managers in the same house, one buying and the other shorting or selling the same stock.

They may just have different time horizon differs. A similar situation is when an asset manager

inside a bank is buying or selling a stock, and another person in the same bank is creating some

kind of derivative overlay on the same stock for a client which could result in delta hedging down

the line. I don't think there are any particular conflicts of interest in these cases.

If you are managing long only as well as hedge fund assets your default position would be to be

underweight the stocks in the long only space that you would be shorting in the hedge fund space,

so again no particular conflict of interest.

Simone Lowe

Malungelo Zilimbola

Ian Hamilton

Nick Middelmann

8

Traditionally, South African hedge funds have been housed within niche boutiques running maybe one or two different

products. There tends to be concentration at both the product level and at the client level. What you are

starting to see now is that some hedge funds managers are starting to move into managing more

traditional mandates and are starting to diversify the products within their business. This is

something that we have done at Thames River over the years. Thames River started with one or two

different products in 1998 - we now have 35 different products, 9 different asset management teams,

and each single strategy manager usually runs both a long-only portfolio and a hedge fund portfolio.

This certainly assisted our business in being able to weather the storm last year, because we were

diversified by geography, by team and by strategy.

Simone Lowe



Marc, what some of your general observations on South Africa from yourperspective as a prime broker?

As I mentioned earlier, we are seeing increased interest in SA and wider Africa both locally and

internationally. Our clients are our product development team so we are always trying to stay one

step ahead, and have created innovative solutions to a number of requests. We are increasingly

being seen as the gateway to Africa.

What will be some of the drivers for further growth in South Africa?

I think the regulatory environment is going to be a catalyst, as far as I am concerned, for growth

in the hedge fund space. As we discussed, the industry here in South Africa has been self-regulated

and the focus was on licensing hedge fund firms, and the next stage will be to regulate the hedge

fund products.

These could include approaches such as UCITS 3, where in the end local pension funds,

particularly, will be able to access hedge funds. The growth of hedge funds will definitely come

from the local pension fund industry accessing going hedge funds.

From an AMIA point of view, we are definitely working closer together with the local bodies like

ASISA and the FSB. I must as well mention they do not actually prefer hearing us saying the

industry is self-regulated, because there are a number of regulations in place already.

As Malungelo mentioned, pension funds do actually want to get into hedge funds. At the moment,

they are limited through Regulation 28 which put a specific 2,5% limit to alternative assets. Then

theyve got to split up this 2,5% into private equity, hedge funds, unlisted property buckets, and so

on.

What will happen going forward is still very much up for discussion. We have engaged with the

FSB, and they are very open to suggestions. They have also up-skilled their own teams when it

comes to understanding the hedge fund industry over the last couple of years. The Treasury got

involved as well, which probably would mean a change of ideas or rules for the industry going

forward. I cannot give you any indication as to the timing of these developments at this point.

One fundamental issue that is never discussed in any public forum in the hedge fund world inSouth Africa is that we do not have a distinction between different classes of investors, for

example institutional or qualified or other types of investors. We have one class only- the general

investing public. This I believe is a fundamental issue that needs to be addressed and brought in

line with other best practices.

When it comes to UCITS 3, it seems that we have an issue with them as well as they are currently

not as well received by the FSB as we would like to believe.

Matthias Knab

Marc Cross

Matthias Knab

Malungelo Zilimbola

Albrecht Gantz

Ian Hamilton

9

Pension funds do actually want to get into hedge funds. At the moment, they are limited through

Regulation 28 which put a specific 2,5% limit to alternative assets. Then theyve got to split up this

2,5% into private equity, hedge funds, unlisted property buckets, and so on.

What will happen going forward is still very much up for discussion. We have engaged with the

FSB, and they are very open to suggestions. They have also up-skilled their own teams when itcomes to understanding the hedge fund industry over the last couple of years. The Treasury got

involved as well, which probably would mean a change of ideas or rules for the industry going

forward.

Albrecht Gantz



There is no doubt that the UCITS 3 framework works well for plain vanilla strategies, but there are

certain strategies for which a UCITS 3 framework is not appropriate, given its liquidity and other

requirements. Liquid equity long-short strategies, CTA strategies etc. all work well within UCITS 3

products.

Currently, the maximum notice period is 14 days on any UCITS 3 products. You have obviously

got to ensure that the underlying liquidity of your instruments matches that of your notice period.

The large majority of South African hedge funds would probably be great candidates for a UCITS 3

structure, as most of the strategies employed would meet the liquidity and regulatory requirements.

At Thames River, we are actually launching a UCITS 3 fund of funds in January 2010. We

currently monitor a universe of 300 UCITS 3 funds and we are very excited about this space.

In our London capital raising event we had several declines from investors who were solely

interested in investing in UCITS 3 mandates.

Is Africa or frontier investing something you as South Africans can capitalizeon?

Certainly. We have seen an increased demand and interest for African-based investment funds,

both multi-manager portfolios and single strategy funds. As a result, many of the South African

fund managers have expanded their team and brought specific investment skills in-house.

Africa has often been seen as an overly risky investment opportunity, and one has to be selective

into which markets one enters. Political risk is the single greatest risk and one has to have a deep

understanding of the political drivers and where future economic policy will be directed.

Africa is now one of the fastest growing emerging markets and this has been evidenced by manymarket segments including its banking, commodity investments and agricultural activities. Many

economies are expanding rapidly on the back of these factors which has steadily increased the

purchasing power and demand of its consumers.

South Africa itself has one of the largest economies and most developed financial market on the

continent. The country had second-mover advantage in terms of following international best

practices, including risk reporting and controls, portfolio transparency and auditing, administration

and custody. South Africans are therefore well poised to take advantage of the frontier investment

opportunities.

Simone Lowe

Marc Cross

Matthias Knab

Michael Toste

10

The large majority of South African hedge funds would probably be great candidates for a UCITS 3

structure, as most of the strategies employed would meet the liquidity and regulatory requirements.

At Thames River, we are actually launching a UCITS 3 fund of funds in January 2010. We currently monitor

a universe of 300 UCITS 3 funds and we are very excited about this space.

Simone Lowe

Africa has often been seen as an overly risky investment opportunity, and one has to be selective into which markets

one enters. Political risk is the single greatest risk and one has to have a deep understanding of the

political drivers and where future economic policy will be directed.

Africa is now one of the fastest growing emerging markets and this has been evidenced by many

market segments including its banking, commodity investments and agricultural activities. Many

economies are expanding rapidly on the back of these factors which has steadily increased the

purchasing power and demand of its consumers.

Michael Toste



My partner Patrice Moyal has just been overseas recently to raise some money. We do offer

offshore funds, including an Africa funds.

One thing I would like to point out is that a lot of foreign investors do not understand South

African landscape, they do not know how skilled the managers are in general.

We do have a very deep and very talented industry here. A lot of the hedge fund managers come

from an institutional long-only background and have very long track records of managing money.

For us as a group, there are numerous opportunities when we start looking overseas.

In general, South Africans are used to managing risk. For us, last year's crisis wasn't really that

much of a big issue. South Africans are used to managing money during all kind of circumstances.

We had to manage money during political sanctions, large currency moves, or very volatilepolitical environments.

So just in terms of risk management skills, we South African managers are well equipped versus

let's say a hedge fund manager in the U.S. who may have managed money for ten years. During

those ten years they had a major bull market, and they have never seen anything different. It can

be a bit frustrating at times talking to foreign investors, because they lack the understanding and

sometimes don't really appreciate the experience, depth and abilities that are available for them

here.

We do not have any offshore fund managers invested with us, but we have had some of them visit

us from time to time. These people have done due diligences on funds in multiple jurisdictions. The

feedback we usually get from them is that the typical operation in South Africa is good, the

company setups are sound and also from a performance or investment perspective, we generallyhear only good feedback.

The problem comes with their typical minimum investment size. Offshore investors usually write

large tickets when investing in a hedge fund - a big single manager here would be able to manage

R100 200m from one client without the concentration risk getting too high. In terms of a large

offshore institution this is typically too small to consider as a strategic allocation, and that limits

our capital raising to some very specific strategies.

I agree with what Malungelu said about the risk management skills of South African fund

managers. For example, in 2008 we took gross exposure down relatively quickly, many funds were

Malungelo Zilimbola

Nick Middelmann

11

A lot of foreign investors do not understand South African landscape, they do not know how skilled the managers are

in general.

We do have a very deep and very talented industry here. A lot of the hedge fund managers comefrom an institutional long-only background and have very long track records of managing

money.

In general, South Africans are used to managing risk. For us, last year's crisis wasn't really

that much of a big issue. South Africans are used to managing money during all kind of

circumstances. We had to manage money during political sanctions, large currency moves, or

very volatile political environments.

So just in terms of risk management skills, we South African managers are well equipped versus

let's say a hedge fund manager in the U.S. who may have managed money for ten years. During those

ten years they had a major bull market, and they have never seen anything different. It can be a bit

frustrating at times talking to foreign investors, because they lack the understanding and

sometimes don't really appreciate the experience, depth and abilities that are available for

them here.

Malungelo Zilimbola



as low as 40%. This is because here fund managers are also managing their own business and

general business risk. This is different to a number of large offshore funds where often a trader

may be part of a broad team where each has been allocated some portion of the risk capital of that

fund. His bonus depends on him putting risk on, so there is no incentive to manage that down, or

to pay attention to overall business risk.

I concur completely with what Nick and Malungelo have both said. I have spent the last year

spending time educating international investors on Africa and investing into Africa. But, there are

a couple of problems. Firstly, generally they know very little about South Africa, and they know

even less about Africa.

Secondly, it is normally going to be such a small part of an international investors portfolio, that

they are not prepared to put the resources behind coming to South Africa, seeing the fund

managers, research this new environment and therefore getting really comfortable with an

allocation.

Thirdly, there has been a drying up of risk appetite. I believe that if the world had continued in the

way that it was 18 months ago, there is no doubt that Africa and South Africa would have seen

big inflows. However, we all know what happened in the world, and it is a slow process for

investors to regain their risk appetite. Initial allocations post the crisis have generally been made to

the more traditional geographys and asset classes. It remains to be seen what 2010 will bring.

I have just got a general question to ask. If we agree that South Africa did not receive very much

money in the past, why is it that Australia, Latin America etc. were able to attract vast amounts of

money, in many cases without requiring fund managers to have a track records and so on.

The other thing is to get back to some of the general framework that we are talking about we are

so obsessed with our own structures internally, we are not acting like international players who are

setting up funds offshore, dollar-denominated funds within the traditional Cayman, Bermuda, allthose particular funds, and going for the international money.

We are sitting around here, very cozy, getting, and waiting for the pension funds to give us money

or the funds of funds. The guys here have not really had to fight for money until now.

Going forward, it might be a lot more different. If we are going to play in the international space

we have got to act like international players.

I am hazarding a guess here, but compared to Australia, South East Asia etc., there may still be this

additional perceived risk about investing into Africa. People do not understand the continent, they

are not prepared to really research it or they have their own prejudices. Firstly, they often just

think of Africa as one country, as opposed to one continent with 53 different countries, all which

have very different driving forces; and secondly, they think of it purely as a commodity play.Thirdly, their perceptions of the risks of investing in Africa tend to be more negatively skewed.

From the prime broking side, we actually expect see large growth going forward. Especially from

the U.S. and out of London, there has been a lot of interest in South Africa, specifically in respect

to investing into local managers.

So, within the past 12 months, we have actually had a couple of funds that we have had to

accommodate regarding setting up offshore parallel funds, and then just again with products that

we actually have a capital raising exercises going on over the next week where we have invited 35

investors to come see some of our local managers, so that blends in with what Simone was saying

Simone Lowe

Ian Hamilton

Simone Lowe

Marc Cross

12

If we agree that South Africa did not receive very much money in the past, why is it that Australia, Latin

America etc. were able to attract vast amounts of money, in many cases without requiring fund managers to

have a track records and so on.

Ian Hamilton



about the guys do not really understand South Africa, but we are taking the initiative to get them

involved in meeting local managers and getting a better understanding of how things operate here.

So there has definitely been lot of interest in coming over to South Africa.

From a practical point of view as an administrator, things are a bit different when we compare

South Africa with the rest of Africa. There are a lot of things we need to look at, specifically when

it comes to pricing which can become very difficult. In South Africa we are very used to dealing

with very good prime brokers and their operations. When you are dealing with a larger pan-Africa

fund, it can become very difficult to get independent pricing. There are stock exchanges that may

only price once a month or once every two weeks. And once they trade, you cannot really be sure

about the volume.

Let me come back to Ians comment for a moment. I think it is not really fair to say that South

African managers are rather passive and just target local pension fund money. As I mentioned, our

firm has launched Africa and Zimbabwean funds, where we have we raised money from Austria,

Geneva and London.

And it is not just us, there are more successes of South African fund managers who operate in the

northern hemisphere. There is Allan Gray in Bermuda, who is doing very well. There is Stephen

Mildenhall from Allan Gray who operates out of the U.K. who boasts some returns of 50%, there is

Simon Marais in Australia a lot of South African managers have entered the world stage andcompete favourably with the best in the market.

Secondly, the global media is often a bit biased when reporting on Africa.

And let me point out a third, essential point. Over the past years, a lot of people have lost money

in Australia, which was a country you mentioned. And look how much money was lost in Russia,

US, UK, etc. On the contrary, I don't think a lot of people have lost money in South Africa.

Tony Christien

Malungelo Zilimbola

13

From the prime broking side, we actually expect see large growth going forward. Especially from the U.S. and out of

London, there has been a lot of interest in South Africa, specifically in respect to investing into local managers.

So, within the past 12 months, we have actually had a couple of funds that we have had to

accommodate regarding setting up offshore parallel funds, and then just again with products that we

actually have a capital raising exercises going on over the next week where we have invited 35

investors to come see some of our local managers, so that blends in with what Simone was saying

about the guys do not really understand South Africa, but we are taking the initiative to get them

involved in meeting local managers and getting a better understanding of how things

operate here.

Marc Cross

Over the past years, a lot of people have lost money in Australia, which was a country you mentioned.

And look how much money was lost in Russia, US, UK, etc. On the contrary, I don't think a lot of people

have lost money in South Africa.

In our company presentations, we use a slide from a Credit Suisse research, which indicate stock market

returns over the last 107 years. South Africa has on the top three best performing stock exchanges in real

returns across the globe. In nominal terms, South Africa is actually the best performing market over the

same period.

Malungelo Zilimbola



In our company presentations, we use a slide from a Credit Suisse research, which indicate stock

market returns over the last 107 years. South Africa has on the top three best performing stock

exchanges in real returns across the globe. In nominal terms, South Africa is actually the best

performing market over the same period.

I was playing a bit of devil's advocate there. Sure, Malungelo represents one of the companies that

is really successful in going international and attracting international money.

There is indeed a very strong case for South African managers, right now, to go overseas and askthe global investor base to really take a close look at other emerging markets, and compare that to

what happened in South Africa. The overseas investor does not want to just hear about South

Africa. It is part of his emerging market portfolio, and he wants to see how it stands against his

other emerging market decisions.

I agree. South Africa needs to position itself is as a very sophisticated emerging market, as opposed

to a risky frontier market. People generally look at Africa and think it is very risky. So they are

looking for 80% or 100% returns a year, because they think such a return level would be adequate

for the perceived risk they think they are taking on.

South African hedge fund managers are quite capable of consistently delivering returns of above

15% in dollar terms, with a volatility of less than 10%. Our operations and infrastructure are good,and we are starting to create structures which facilitate international investors. I think that this is a

very compelling investment opportunity for any investor!

Coming back to the marketing aspect - South Africans are great going overseas doing road shows,

but often they do not have structures in place to take foreign money. Also, once a foreign investor

makes a decision, he wants to be able to invest that month, but setting up an offshore vehicle can

take 6-8 weeks, if not longer. By that stage the investor is gone. Such incidents have happened

constantly, and it is not a good thing for our industry when this kind of thing happens.

International investors generally do not want to seed structures. They want to know that the fund

manager has raised other money or is putting their own money into the structure. Ideally, the

structure should be operational already.

Investors don't want to be told that the fund that they are being shown, they can only actually

invest into in 3 or 6 months time once structures are set up. As Ian said, if they like it they will

want to perform further due diligence immediately and invest sooner rather than later. They want

to know that they can do an operational due diligence on a structure that is already operational,

with audited financial statements, and so on. So if fund managers are really serious about raising

offshore money they need to take the steps to build out the international side of their business.

Again, we have to consider the historical roots or background of the local hedge fund industry

here. A lot of the managers are able to run a fairly decent sized asset manager based on assets

raised from fund of funds or pension funds. It wasn't a necessity to raise money offshore.

Ian Hamilton

Simone Lowe

Ian Hamilton

Simone Lowe

Nick Middelmann

14

South Africa needs to position itself is as a very sophisticated emerging market, as opposed to a risky frontier

market. People generally look at Africa and think it is very risky. So they are looking for 80% or 100%

returns a year, because they think such a return level would be adequate for the perceived risk they think

they are taking on.

South African hedge fund managers are quite capable of consistently delivering returns of above 15% in

dollar terms, with a volatility of less than 10%. Our operations and infrastructure are good, and we are

starting to create structures which facilitate international investors.

Simone Lowe



Given that international investors do not want to seed structures, local managers would have to

create the structures with proprietary cash, and run them for a period long enough to pass due

diligences. Obviously this is an additional layer of costs which many managers have historically

viewed as unnecessary. This will probably change over time.

Tell us more about the opportunities you see for investors who want someexposure to Africa. What is happening, where are you putting your money?

Over the next one to three years, there will be a lot of opportunities in Zimbabwe. My firm has

been singing that song for a while now. We have two Zimbabwe funds, which were launched inMay 2009.

The Dolarisation of that economy was a catalyst for our launching those funds. The capacity

utilization of the Zimbabwean economy is sitting at 30%. And inflation, before dolarisation, was

1.5 million percent and now you have got a benign inflation in Zimbabwe or normal inflation like

you would expect in any country.

Some of the companies have reported recently, reported the US dollar numbers and some of thenumbers are quite impressive. A good example is Econet. Econet is a mobile company in

Zimbabwe. It controls about 60% of the mobile telephony market in Zimbabwe. It has reported

about $150 million revenue. Next year, that is going to double to $300 million and it is making

profits and paying taxes. So government would receive taxes and begin to spend that money on

infrastructure and recovery will ultimately recovery will come through.

On a comparative basis mobile penetrations in South Africa are over 100% while sitting at 21% in

Zimbabwe, you have got a massive growth potential in Zim. If you look at education and literacy

levels of Zimbabweans versus South Africa, there is no reason why a GDP per capita in Zimbabwe

should not be equal if not better than South Africa, with relatively less education and unskilled

population.

So compared to Zimbabweans, I think in 10 years time, Zimbabwe, is going to come close toSouth Africa in terms of the GDP per capita. If it is sitting at $1000 today, South Africa is sitting

at $5,800, therefore Zimbabwe has to grow 5 times to be at par with South Africa.

Another way of looking at, is that Zimbabwe has got infrastructure in terms of railway, some

electricity capacity running at between 20 and 30% utilisations. If it operates at capacity, it has got

to grow five times.

The rest of Africa, I think, if you talk infrastructure, Africa does not have power, just basic

electricity. Africa has to spend a lot of money in electricity generation, telecommunication and

roads.

Matthias Knab

Malungelo Zilimbola

15

Over the next one to three years, there will be a lot of opportunities in Zimbabwe. My firm has been singing that song

for a while now. We have two Zimbabwe funds, which were launched in May 2009.

The Dolarisation of that economy was a catalyst for our launching those funds. The capacity

utilization of the Zimbabwean economy is sitting at 30%. And inflation, before dolarisation, was

1.5 million percent and now you have got a benign inflation in Zimbabwe or normal inflation

like you would expect in any country.

Some of the companies have reported recently, reported the US dollar numbers and some of

the numbers are quite impressive. A good example is Econet. Econet is a mobile company in

Zimbabwe. It controls about 60% of the mobile telephony market in Zimbabwe. It has reported

about $150 million revenue. Next year, that is going to double to $300 million.

Malungelo Zilimbola



Just go to Nigeria....sell.

There you are more often without power. Nigeria will have to spend substantial funds on

infrastructure, electricity, roads, rail, all of that.

At the moment, Africa with a 800 million population contributes less than 1% of World GDP that

is 25% of the world's population contributing virtually nothing to the world GDP. I think these

numbers won't last for a long time. Sure, this will be a long-term development, but step by step,

day by day, we will see development in Africa.

I am going to speak on the African side, excluding South Africa. If you take Nigeria as an

example, the formal electricity sector in Nigeria can only supply 20% of the electricity needed for

Nigeria. A country of 150 million people relies very heavily on generators to power the country.

This alone is an incredibly exciting opportunity right now.

From a macro view, yes the economy is driven by oil, but the service sector is developing strongly.

Here you have telecom, financials, to name just a few. There has been a substantial banking

consolidation in Nigeria over the last 8 years. The country went from 125 banks to 85 banks and

by the end of 2008 there were 25 banks. More recently, you have seen a very thorough banking

audit take place, and 10 of the 25 banks have now been highlighted for having capitalization and

margin loan issues. This has led to the banks being sold down aggressively and in a lot of

Simone Lowe

Malungelo Zilimbola

Simone Lowe

16

Nigeria will have to spend substantial funds on infrastructure, electricity, roads, rail, all of that.

At the moment, Africa with a 800 million population contributes less than 1% of World GDP

that is 25% of the world's population contributing virtually nothing to the world GDP. I think

these numbers won't last for a long time.

Malungelo Zilimbola

The formal electricity sector in Nigeria can only supply 20% of the electricity needed for Nigeria. A country of 150

million people relies very heavily on generators to power the country. This alone is an incredibly exciting opportunity

right now.

From a macro view, yes the economy is driven by oil, but the service sector is developing strongly.

Here you have telecom, financials, to name just a few. There has been a substantial banking

consolidation in Nigeria over the last 8 years. The country went from 125 banks to 85 banks and

by the end of 2008 there were 25 banks.

Nigerian stocks are down 68% from their peak, and are down 32% year to date. A lot of the other

emerging market exchanges have all recovered; whereas a lot of the African exchanges have not

- they have lagged. This is largely due to the fact that a lot of liquidity and money has not come

back into the African markets.

As the liquidity starts to return, these markets will recover.

Simone Lowe



opportunities offering great value. Governor Sanusi, the Nigerian Central Bank Governor has been

incredibly pro-active with how he has dealt with the banking sector and I think this will be very

good for Nigeria and for Africa as a whole.

Nigerian stocks are down 68% from their peak, and are down 32% year to date. A lot of the other

emerging market exchanges have all recovered; whereas a lot of the African exchanges have not -

they have lagged. This is largely due to the fact that a lot of liquidity and money has not come

back into the African markets.

As the liquidity starts to return, these markets will recover. Africa is taking proactive steps torejuvenate the economies and improve the ability to get capital into the countries.

So, we see Zimbabwe going through positive change, Nigeria is working on the banking side and

should see a huge recovery, and other African markets are opening up nicely. This is really

allowing people to get involved, which I think is exciting. It will be volatile, but there is also just

this huge growth differential between Africa and the developed world right now, which gives us

even more of a compelling reason to invest.

What do you think is behind that outperformance?Can we elaborate a bit on the structure and fee level of these Africa funds? Are these hedge funds

or rather thematic long-only funds?

Is it because of a better risk managementFrom a South African perspective, the pan-Africa theme has substantially increased the investment

opportunities and investment universe for us. A lot of those stocks come from the long-only side.

You can short certain stocks elsewhere, or you can sell short certain instruments. Liquidity can be

very low and that is a separate issue on its own.

So, you could have gone short a South African stock which is very liquid and you have gone long

a Zimbabwean stock which is reasonably liquid and that, I think, has actually increased our

investment universe.

Who else is buying these Zimbabwean companies?

There are a couple of other investors that we come across frequently. There are a number of fund

managers who also manage an Africa funds is buying into these stocks. There is Investec Asset

Management, Cadiz, Imara, Renaissance Capital are buying these stocks.

In addition to those, there are quite a few Zimbabweans or South Africans who moved overseas

twenty years ago, who now run emerging market funds. Africa is included in their mandate. While

some of them not have invested into Africa up to this point, they are starting to do so, helped by

their upbringing, knowledge of the continent and professional connections.

Select African stocks are often added as an option to a larger portfolio. If it goes to zero, they are

not too concerned, but the upside can be five to ten times, or more. So, a couple of international

investors are engaging in Africa in some way or another, even though they do not have Africa

specific portfolios.

From a prime broker's perspective, what do you see happening?

In terms of the inflows in to the African funds, we have not seen any - with the exception of the

Oryx Africa Fund which is Prime Brokered by Goldmans. There has been a lot of interest in them

though. The main areas of interest include Egypt, Nigeria or Kenya in sectors such as

telecommunications, financial or banking.

Of course, there are also challenges that come with investing in Africa, such as the inability to

short stocks in certain countries, and there is also a limit to the amount of derivative structures in

place.

Ian Hamilton

Malungelo Zilimbola

Matthias Knab

Malungelo Zilimbola

Simone Lowe

Matthias Knab

Marc Cross

17



We are talking quite a lot about Africa, but the bulk of the African assets are certainly invested in

South Africa. Going forward, the question is where will the returns come from?

South Africa is unique in that you have got fairly big South African asset managers that have

concentrated amounts of money that they are managing.

So, Allan Gray would be an example, the PIC would be another. They have to buy large holdings

in the liquid companies. Then you have large international players making country allocations,

and obviously active in the large liquid shares. This means that the liquid shares in the South

African market get valuations set with reference to movements and sentiments in international

markets and leaves massive differences in valuation and timing of performance between liquid and

illiquid counters. The illiquid counters are further impacted by fund flows from various domestic

allocations and redemptions. These differences in valuation caused by fund flows rather than

fundamental valuation provide enormous opportunity and are particularly suited to hedge fund

activity.

I buy the whole story on Econet, and it makes a lot of sense, but there are probably a whole lot of

companies in South Africa of a similar market cap which given the same time horizon will provide

similar returns. And you would not have to take the sort of basis risk that you are when buying

Econet in Zimbabwe and shorting MTN in South Africa, if you wanted to set up a hedge for that

position.

So I think there is plenty of opportunity currently. Over time fundamentals will show themselves

and whether the market goes up or down from here actually does not matter. The point is that a lotof the larger-cap companies have been beneficiaries of international fund flows which have pushed

their prices up unsustainably relative to good quality mid-caps, and those discrepancies will rectify

themselves - they always have, and always will.

What are the fees for these Africa long-only funds?

The fees for Africa funds in general tend to be anywhere between the 1% and 2% management fee,

20% performance fee and some will have some kind of hurdle - LIBOR+3% or something along

these lines. So we are dealing with standard hedge fund fees.

A question to ask is if an African manager can justify those fees? Africa is a relatively small,

defined market, but it is very expensive to do research into Africa. There is very little brokerresearch to rely on, so the manager really needs to do all the research themselves. To cover the

market you need to be on the ground. Africa is a large continent, the researchers have to travel

extensively all that is expensive. In addition, the funds will always remain relatively small, so it

was felt that the fees are justified, even for long-only or long-biased products.

A good idea is probably having a hurdle in place. Then, you obviously compensate the manager

only if he outperforms.

Nick Middelmann

Matthias Knab

Simone Lowe

18

We are talking quite a lot about Africa, but the bulk of the African assets are certainly invested in South

Africa.

I buy the whole story on Econet, and it makes a lot of sense, but there are probably a whole lot of

companies in South Africa of a similar market cap which given the same time horizon will provide similar

returns. And you would not have to take the sort of basis risk that you are when buying Econet in Zimbabwe

and shorting MTN in South Africa, if you wanted to set up a hedge for that position.

Nick Middelmann



Correct, doing research in Africa is a challenge, information is not readily available and company

disclosures are not great. The markets greatly differ in from a regulatory and enforcement

perspective. You need to deal with those types of issues but in time these markets will be improve

from financial reporting and governance point of view.

How did the South African funds fare in 2008? What were some of the lessonslearned?

I think we fared quite well in 2008. Our market neutral fund was positive, compared market which

was down 23%. Some of the more aggressive long-short funds were down about 5%, which is not

bad.

I think that was a very good performance. One lesson learned was probably that concentration

combined with leverage is a killer any form of concentration, whether it was a concentration in

terms of stocks or themes, or even economic factors such as currency, interest rates, etc.

So I think concentration coupled with leverage has been a big lesson for us. Another concentration

is over-concentration in terms investors. For a fund manager, the solution is to diversify your

client base, choosing your clients very carefully. I think it is fair and necessary that clients do due

diligence on a fund and ask all sorts of questions. I believe that now the manager must in turn and

ask questions on their clients business models and be able to manage liquidity issues.

As a fund manager, ideally you have strong and committed clients who themselves would not

suffer from any redemption issues. We have been performing very well and our businesses are

fine, and therefore we believe we deserve strong clients as well.

As an administrator who serves a significant proportion of the South African hedge fund industry,

contrary to what happened with administrators overseas whose assets under administration in

some cases came down up to 60%, South African hedge fund assets, at least those on our platform,

were actually up about 7% from January to December 2008.

2008 was a pretty normal cycle form that perspective: some people lost money, but others gained

money. Some funds lost value, others were up. Some closed, and other funds opened. but there

were other funds that gained value as well. There were funds that closed, but there were funds that

were opening as well.

And 2009?

Malungelo Zilimbola

Matthias Knab

Malungelo Zilimbola

Tony Christien

Matthias Knab

19

I think we fared quite well in 2008. Our market neutral fund was positive, compared market which was down

23%. Some of the more aggressive long-short funds were down about 5%, which is not bad.

Malungelo Zilimbola

As an administrator who serves a significant proportion of the South African hedge fund industry, contrary

to what happened with administrators overseas whose assets under administration in some cases came

down up to 60%, South African hedge fund assets, at least those on our platform, were actually up about

7% from January to December 2008.

Tony Christien



2009 has been pretty much the same. We saw inflows particularly during the last two months. We

have seen a positive, upwards movements of fund values across the board. The majority, probably

98% of our funds, are either up well or up. The flows that we have seen this year are positive.

2008 was manageable for South African managers, despite the volatility of the stock markets and

the Rand, because we are used to managing money under such circumstances. We went through

the knock-on effects of the Russian crisis, we had Asian flu, the dot-com era hit us even though we

did not have any dot-com companies here. Our IT environment was absolutely destroyed in 2000

so what a lot of the managers who have been in the markets for some time have learned, is to

take your bets off when things start going wrong. Some people had some liquidity issues, but byand large most managers reacted relatively well and took their bets off. This careful, risk-averse

approach is probably just entrenched in our being because of the type of volatility that we have

experienced as a country over the past fifty years.

I can add that institutional investors here were really impressed and happy with the 2008 returns

of hedge funds. Malungelo mentioned some single funds were down 5% - compare that to the

stock market which was down 32% for the year.

The feedback we have had from the institutional investors has been in terms of their reasoning for

investing in the hedge fund market via the funds of funds and what the hedge funds and the

private equity funds and various other alternatives structures can do for them on a full portfolio

basis for the pension fund. They were happy with this performance.

I have a question for the fund managers here at this Roundtable. We previously discussed the risks

of concentration within the investor base and the need for diversification. Are you now looking to

have pensions invest directly into your single hedge funds, or would you still go to a fund of funds

to raise assets?

Multi-managers are relatively dominant in South Africa compared to most other markets. I don't

know the exact percentage, but I am sure in excess of 80% of assets come through fund of funds

channel.

At this point, even if you had a concentration with a multi-manager, I am not suggesting to go

direct to the pension funds but to have a healthy spread of fund of fund clients.

I think it is a bit of a misnomer to think that you are diversifying your client risk by going directly

to large pension funds. They are in many instances the end client for a fund of funds, and make

asset allocation decisions which can be quite volatile.

I think where you see more stability is in where the ultimate investor is a private client. Fund of

funds that have large private client components tend to be more stable as investors because they

have a longer time horizon, and unlike pension funds, they are not driven by asset liability

matching. Private clients tend to be happy if you deliver a stable performance over time, and dont

lose them money in times of crisis.

So from a fund manager perspective you have to recognize who your end clients are and where

your risks lie and manage your business accordingly.

When it comes to 2008, Thames River learnt three very important lessons.

Number 1 was the importance of matching your investor liquidity with the underlying liquidity of

the instruments into which you are investing, especially from a fund of fund perspective.

Number 2 was communication with clients. Our travel costs skyrocketed in the fourth quarter of

last year. We traveled extensively and saw all of our clients, and I believe that led to a lot of client

retention that we potentially would not have had, had we not been so proactive in this department.

More so, this has certainly also helped us to be able to raise significant assets this year. Our

ongoing communication helped the clients to understand their investments and feel comfortable,

when the world was in a very uncomfortable place.

Tony Christien

Nick Middelmann

Albrecht Gantz

Malungelo Zilimbola

Nick Middelmann

Simone Lowe

20



Number 3 was the importance of diversification - by team, by product, by geography, by structure

and by investor. This enables you to have different pistons in your business which can fire at

different times and obviously hugely diversifies your risk. Also we are a debt free business and

were able to be masters of our own destiny, we were not beholden people that did not necessarily

understand our business.

In addition to understanding portfolio liquidity and mismatches that may exist, it is important to

understand who your co-investors are. This is not only symptomatic of small funds but larger

funds can also suffer when the investor base is too concentrated. While one cannot guard against

other investors actions, one can put measures in place to understand these softer risks and allocate

capital accordingly.

Portfolio transparency is critical in our investment process and not only do we need to understand

every position on the portfolio, we also need to verify the custody of these holdings. This type of

research is labour-intensive and requires adequate skill and systems to collate, store and manage

the information.

Lastly, one needs to understand the legal structure one is investing into. Working in multiple

jurisdictions means there are no standardized legal structures and one therefore needs to

understand each investment opportunity individually. What are my rights as an

investor/shareholder? What are the rights of other investors/shareholders? Who is making the legal

decisions and what is their decision making power?

One highlight of the South African hedge fund industry that everyone has actually missed so far is

that we did not have any fund blowout in 2008. Given all the liquidity issues, volatility and marketdisruption that happened on a global scale, I think that is a massive highlight, given those

circumstances.

Michael Toste

Albrecht Gantz

Our travel costs skyrocketed in the fourth quarter of last year. We traveled extensively and saw all of our

clients, and I believe that led to a lot of client retention that we potentially would not have had, had we not

been so proactive in this department. More so, this has certainly also helped us to be able to raise

significant assets this year. Our ongoing communication helped the clients to understand their investments

and feel comfortable, when the world was in a very uncomfortable place.

Simone Lowe

One highlight of the South African hedge fund industry that everyone has actually missed so far is that we

did not have any fund blowout in 2008. Given all the liquidity issues, volatility and market disruption that

happened on a global scale, I think that is a massive highlight, given those circumstances.

Albrecht Gantz


22/22

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Opalesque Roundtable South Africa 2010