FR Flexible Income Fund

Many people comment that the fees charged by hedge fund managers may be exorbitant, unregulated and not transparent. In recent years, South African financial regulators have added more regulation to ensure hedge funds are more tightly regulated and that fees are more transparent, with more detailed disclosure - these funds have also added more protection for investors. There is also a misunderstanding that hedge funds carry more risk. Investors should understand the context in which hedge funds operate: hedge funds may offer lower risk within a portfolio context, although the hedge fund type itself may be riskier.

Yes - they must be registered with the FSCA to provide financial services for the financial products termed "participatory interests in a CIS Hedge Fund", FAIS licence category 1.26 and/or 2.22, according to Annexure 1 and 3 of Board Notice 194 of 2017 (refer to the Determination of Fit and Proper Requirements of Financial Services Providers, 2017).

Hedge funds have existed in South Africa for over 25 years and have, over time, developed genuine and sustainable track records. They are regulated as other unit trusts under CISCA but often offer uncorrelated returns to the general market. If used correctly in a portfolio, they may lower the portfolio's risk profile and enhance returns. Hedge funds also offer investors a different style of investing - some managers aim to protect investors' money from a negative return, while others aim to beat the benchmark by a considerable percentage, and some may take an activist stance on certain themes.

There are more dangers and risks involved in investing in hedge funds than in traditional equity products. They are generally more complex, and the strategies used to generate returns or add downside protection may differ, largely because a hedge fund may short shares and use derivative structures to enhance returns. Because of this complexity and the tools available to hedge fund managers, it may be plausible for hedge funds to generate positive returns during extreme market volatility and to have fewer negative periods. Investing in hedge funds therefore requires a better understanding of the markets and the tools used in investing, which is why, on average, hedge funds may carry a riskier profile. Each investor should consider their knowledge of the markets and their appetite for risk before choosing a hedge fund, and should consult a professional if unsure.

Long Only funds are products which can only take "Buy" positions, or Long Positions, in equity. This means they can only buy the actual share of a company listed on an exchange - in All Weather's case, the JSE. These funds often use a benchmark as a starting point and will either buy more of a company than the benchmark ("Overweight") if it is viewed favourably, or buy less ("Underweight") if it is viewed negatively. A Hedge Fund is an alternative type of product that can make use of more investing strategies, such as "Short" selling - where a share is sold before it is owned and later bought back - used as a hedging strategy to mitigate risk. A hedge fund may also take concentrated positions in shares and might not use a benchmark as a starting point.

All Weather Capital has two main types of funds on offer, namely: Long Only Equity (traditional products) and Hedge Funds (alternative).

It varies by fund. For example, the All Weather BCI Balanced Fund (A1) carries a Medium risk profile, reflecting moderate equity exposure and moderate expected volatility, geared towards long-term capital preservation. Each fund's MDD sets out its specific risk profile.

It seeks high-quality businesses that compound earnings sustainably over the long term and are trading well below All Weather's assessment of their intrinsic value, using a fundamental bottom-up process that evaluates each business's financial and competitive position, growth opportunities and management quality.

Through in-depth fundamental, bottom-up research: the team looks for stocks trading at a significant discount to their assessed intrinsic value for long positions, and for hedge funds, will short stocks that appear materially overpriced relative to intrinsic value.

Investors can range from individuals to large institutions.

The Long Short Performance Hedge Fund can run net exposure from -50% to +150%, aiming to profit from both under- and over-priced stocks. The Market Neutral Hedge Fund runs net exposure from -50% to +50%, pairing long positions with short positions in similar sectors so it's less affected by broad sector-wide market moves.

Application forms, the fee schedule, the Performance Fee FAQ and the Quarterly General Investor Report are all available on www.allweather.co.za, from your financial adviser, or free of charge on request from the Manager.

Either is fine. All Weather's fund documentation is not advice as defined under FAIS, so you can invest directly or through a financial adviser - if you use an adviser, their fees must be disclosed to you separately, and they may be a related party to the co-naming partner and/or BCI.