South African hedge funds want international talent

South African hedge funds have weathered the storm much better than their European or American counterparts, without the large scale redemptions and with good returns. The industry, which has total assets under management of over 30bn Rand, is only ten years old and has always had a domestic focus, low levels of leverage and few foreign investors, which has stood them in good stead in recent times.

The upshot is that several hedge funds are still hiring and looking for people with international experience. "Local hedge fund managers mostly come from an institutional money management background, and many people in the industry have gained experience in offshore markets, working in the UK or US at financial institutions," says Carla de Waal, portfolio manager at Novare Investments. "The larger, more experienced teams with a longer track record stand a greater chance of attracting inflows than new start-ups after last year's economic turmoil."

Last year the Financial Services Board (FSB) introduced a compulsory registration process: all aspiring hedge fund managers must prove they have the appropriate qualifications, a good track record and the right skills in order to be granted a licence and allowed to work. South Africa's Alternative investment management association (Aima) says they strongly support the new regulations, including the checks on the financial soundness of the hedge fund manager's business.

But one of the biggest challenges the sector faces, according to Brett Thornton-Dibb, head of prime finance for SA at Deutsche Bank, is "the hiring and retention of the right talent in order to ensure that managers maintain the highest investment quality standards," which the FSB's new experience and expertise criteria are designed to promote.

"I don't think the new FSB regulations are making it more difficult to find suitably well qualified people," says de Waal, who is also a board member of the South African branch of Aima. "It seems that the far majority of local hedge fund managers meet these minimum requirements and have thus been approved by the FSB in this licence category."

Locally, given the trend of increased outsourcing of services to independent third parties, the recruitment burden is more on the local administrators and prime brokers in order to ensure that they have sufficient personnel to service all their hedge fund clients and mitigate operational risk.