Ten years ago, you could not have bought this fund

A few years ago, an adviser came to me with a problem most planners will recognise. His client was a retired teacher in her late sixties. Single income. A modest pension. She had watched her capital churn through a market she no longer had the time, or the appetite, to ride out. The balanced fund in her portfolio had given her a punishing 2020, a forgettable 2021, and not much to celebrate since.

She had asked him the question every investor eventually asks. Is there not something better than this?

For most of my career, the honest answer to that question was complicated. There were better tools. Strategies that could hedge, go short, manage drawdowns, and target real returns without depending on the index to do the heavy lifting. But those tools sat behind a door marked qualified investors only. They were for institutions, for pension funds, for wealthy families who could meet the high minimums and prove they belonged in the room. The retired teacher in front of him did not qualify.

That answer is no longer the right one, and it is worth understanding how that came to be.

South Africa’s hedge fund industry has just crossed a quiet but important threshold. At the end of 2025, retail hedge funds account for most of the hedge fund industry assets for the first time since the regulatory framework came into effect in 2015. Industry AUM has reached R216 bn. Retail funds attracted
R9.1 bn in net inflows during a single year.* Ordinary South Africans, advised properly, are choosing this for themselves.

Peregrine Capital, established in 1998, is the oldest hedge fund manager in South Africa, and so we knew that if the status quo was going to change, it was incumbent on us to drive that change. For the better part of a decade, we have done the unglamorous work that sits behind those numbers. We engaged with the regulators. We helped change the terms to fit the platforms that provided custody to the advisory ecosystem. We built funds that could live inside DFM wrappers without compromising the strategy that ran inside them. We had thousands of conversations with advisers; most of whom had spent their careers being told that hedge fund was a four-letter word in client portfolios.

The structural exclusion of ordinary investors from some of the most useful tools in the industry was making their long-term savings outcomes worse than they needed to be. The teacher I mentioned earlier has options today that she did not have eight years ago. So does her adviser. It helps to be specific about why these matters.

The diversification problem in a typical South African portfolio is real. The FTSE/JSE Capped All Share Index is currently around 30% resources (source: Bloomberg). A third of any equity allocation in a domestic portfolio is exposed to commodity prices the investor has no view on. Bonds remain useful, but they are not the diversifier they once were. Cash feels safe, but over any long-term horizon, it is a slow surrender to inflation. A well-run hedge fund complements all of these. The toolkit allows a manager to manage downside, reduce correlation to equity markets, and target a smoother return profile. That last point is the one that matters most for ordinary savers. The single most damaging thing a long-term investor can do is panic out of a market during a drawdown, and a fund that gives them a calmer ride is a fund they are more likely to stay in.

Track record is the only honest answer to whether a manager has done this well. Our Pure Hedge Fund has not had a negative calendar year since its launch in July 1998. Its five-year correlation to the JSE is negative for three percent. Our High Growth Fund has compounded at 22.60% a year, net of all fees, since February 2000. One million rand invested at inception is worth more than R210m today. The SA Multi Asset High Equity category average over the same period turned that million into R14.7m.** 

This is not about luck. It is 27 years of doing the same disciplined work through every market environment that has come our way, and through every market environment that will.

The proposed amendments to Board Notice 90 are worth watching. Currently with the FSCA, they would – if approved – allow unit trust portfolios to allocate directly to retail hedge funds, opening a pathway for millions of ordinary investors to access these strategies through the portfolios they already hold. The outcome is uncertain, but the direction of National Treasury signaled in the 2026 budget suggests the conversation has shifted – from whether retail investors should have access to better tools, to how.

For advisers, the question worth sitting with is whether the portfolios you build for your clients are using the full toolkit available to them. Particularly in the income-protection and growth segments, where the trade-off between volatility and return matters most, a properly chosen hedge fund earns its place.

For investors, the question is simpler. The instruments that have done heavy lifting in institutional portfolios for three decades are now available to you. What is left to decide is the manager you trust to use them on your behalf.

*Statistics from the Association for Savings and Investment South Africa (December 2025). 

**Refers to the Peregrine Capital High Growth QI Hedge Fund. R1m invested at inception is worth more than R214.0m today, SA Multi Asset – High Equity Category: R14.7m, CPI +5: R14.4. High Growth Fund annualised return: 22.60% | SA Multi Asset – High Equity Category annualised return: 10.74% | CPI +5 annualised return: 10.66%, all since inception (February 2000).The Peregrine Capital Pure Hedge QI Hedge Fund: R1m invested at inception is worth more than R111.9m today, SA Multi Asset – Low Equity Category: R13.9m, CPI: R4.4m. Pure Hedge Fund annualised return: 18.41% | SA Multi Asset – Low Equity Category annualised return: 9.89% | CPI annualised return: 5.41%, all since inception (July 1998).Data to 31 May 2026 | Source: Peregrine Capital, Morningstar, Bloomberg. 

Peregrine Capital (Pty) Ltd is an authorised FSP (FSP No. 607). For further information please visit www.peregrine.co.za. 

DISCLAIMERS: Fund performance: Returns are quoted net of fees | Fund performance provided as at 31 May 2026 | Fee class status: Class: A, distributing. Net asset value figures (NAV to NAV) have been used for the performance calculations, as calculated by the manager at the valuation point defined in the deed, over all reporting periods. The performance is calculated for the portfolio. Individual investor performance may differ, as a result of initial fees, the actual investment date, the date of reinvestment and dividend withholding tax. Performance is based on a lump sum contribution and is shown net of all fund charges and expenses and includes the reinvestment of distributions. Actual annual figures are available to the investor, on request at ask@peregrine.co.za. Investment performance calculations are available for verification upon request by any person. A schedule of fees, charges and maximum commission is also available on request from the manager. The rate of return is calculated on a total return basis, and the following elements may involve a reduction of the investor’s capital: interest rates, economic outlook, inflation, deflation, economic and political shocks or changes in economic policy. Annualisation is the conversion of a rate of any length of time into a rate that is reflected on an annual basis. Past performance is not indicative of future performance. The Peregrine Capital High Growth QI Hedge Fund is a medium to high-risk investment. The Peregrine Capital Pure Hedge QI Hedge Fund is a low to medium risk investment. The figures shown reflect the returns of the above named qualified investor hedge funds. The value of participatory interests or the investment may go down as well as up. Collective investment schemes are traded at ruling prices and can engage in borrowing and scrip lending. The manager does not provide any guarantee either with respect to the capital or the return of a portfolio. The manager has a right to close the portfolio to new investors in order to manage it more efficiently in accordance with its mandate. Nothing herein constitutes financial advice, a recommendation, or an offer to buy or sell any security. Please refer to the latest MDD/factsheet for further information.