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"I think that it would be arrogant for anyone in the industry to say that they have nothing to learn from this blow up" |
By the start of last month it was official: the biggest collapse of a South African hedge fund had occurred. Evercrest Capital’s Evercrest Aggressive hedge fund, managed by Marc van Veen, lost 66% of its R200 million ($28.2 million) assets when it went short on Sanlam, a local insurer, betting that its shares would fall. Instead they went up by 17% in April. Local media speculate that a relatively high leverage level of five times compared with an industry average of two inspired the dramatic losses, although the exact level cannot be confirmed. However as the dust settles on Evercrest, which will be shut after just two years’ operation, questions are being asked as to how such losses can be avoided.
Hot on the heels of Evercrest’s blow-up, the Financial Services Board in South Africa is expected to release regulations for hedge fund managers. Combined with this, the Group of Eight finance ministers met last month to discuss a voluntary code of conduct to help guard against the systemic risk that hedge funds pose.