March/May 2026: published in Today’s Trustee (edited)
Topic: Wade Witbooi speaks to Tim Cohen about the changing role of hedge funds in portfolio construction, drawdown control and smoother outcomes.
What hedge funds can do for your pension
Hedge funds are losing the ‘Wolf of Wall Street’ mystique as investors use them less to chase fireworks than to survive them
South African hedge funds are going through an oddly grown-up reinvention. For years, they carried the aura of financial theatre: exotic strategies, mysterious shorts, and just enough leverage to make ordinary investors picture braces, shouting and bonus-season madness.
Now, increasingly, they’re being sold not as sports cars, but as shock absorbers – tools for retirees, living-annuity investors and cautious allocators trying to avoid being flung through the windscreen every time markets hit a pothole.
That’s the picture painted by Wade Witbooi, managing director of Amplify Investment Partners, who says the client conversation has shifted decisively. Where hedge funds were once associated with “super returns” and the “Wolf of Wall Street” mythology, they’re now increasingly being discussed in the language of portfolio construction, drawdown control and smoother outcomes, especially for post-retirement clients.
In Witbooi’s telling, the category has moved from excitement to utility – from return-chasing accessory to risk-management component.
According to the Association for Savings and Investment South Africa (Asisa), the hedge-fund industry ended 2025 with assets under management of R216bn, a 17% increase from R185bn at the end of 2024, with assets spread across 219 funds managed by 13 companies. The industry delivered a median return of 15.07% in 2025.
More significantly, retail hedge funds recorded R9.1bn in net inflows for the year, while qualified-investor funds, which include professionals, saw R4.3bn flow out – a historic shift that saw retail funds overtake their institutional counterparts in total assets for the first time. Multi-strategy funds attracted the strongest new money, drawing R8.6bn across retail and qualified-investor categories combined.
Search for diversification
Regulation has helped to accelerate that shift. Changes to Regulation 28, which governs retirement-fund allocations, now permit up to 10% of a retirement fund to be invested in hedge funds, with up to 5% in a fund of hedge funds – double the limit for a single hedge fund. That’s opened a meaningful new channel, particularly for living annuity clients managing sequence risk, where a sharp early drawdown can permanently impair long-term income.
The argument for diversification has become another major driver of demand, especially given the composition of the Johannesburg Stock Exchange. Gold and platinum counters now account for roughly 30% of the local index – a concentration that leaves index-hugging portfolios exposed to commodity price moves driven by a thin spot market. The arithmetic of recovery makes the case for protection starkly: losing a third of your capital means you need a 50% gain just to break even – exactly the problem hedge funds are designed to address.
There’s a global echo, too. Reuters reported in January that a Bank of America survey found that more than half of fund investors plan to increase hedge-fund allocations in 2026, while the industry had grown to roughly $5-trillion by the third quarter of 2025. Goldman Sachs, citing its own allocator survey, said more than 90% of allocators felt hedge-fund portfolios met or exceeded expectations in 2025, with the strongest demand for strategies less correlated to traditional assets. South Africa is participating in a broader search for diversification in a world that keeps finding new ways to become unstable.
The range of strategies used reflects how far the industry has evolved. Long-short equity funds take positions on relative performance between stocks. Market-neutral strategies aim to deliver returns regardless of market direction – useful when the question of who occupies the White House matters more than any individual company’s fundamentals.
Fixed-income and commodity-focused strategies add another layer of diversification. The most sophisticated allocators blend several of these, using the low correlation between strategies to smooth the overall return profile and dampen volatility.
Return targets vary significantly by strategy and mandate, with some funds targeting nominal returns of 15%-20% per annum after fees, while more capital-preservation-oriented products target CPI-plus-five over a cycle.
The current environment makes the downside-protection argument particularly compelling. Geopolitical uncertainty – from flip-flops in US trade policy to the Iran conflict and its impact on oil prices and Strait of Hormuz shipping – has made tail-risk management a live concern rather than a theoretical one.
Experienced practitioners note that downside protection, particularly through local index put options, is currently relatively affordable, despite recent market rallies, making this an attractive moment for adding that protection
to a portfolio. Gold, by contrast, has become more positively correlated with equities than it used to be, reducing its traditional hedging value and pushing allocators towards more targeted instruments.
Amplify has 10 retail hedge funds, and had more than R80bn in gross assets under management at the end of last year, with hedge-fund assets rising from about R5bn two years ago to roughly R13.5bn.
Witbooi argues that regulation has acted both as a constraint and as a seal of legitimacy. Regulation 28 limits how much retirement funds can allocate, but outside those constraints – especially in post-retirement portfolios – hedge funds are increasingly treated as normal building blocks rather than speculative side bets.
So, the real story is not that hedge funds have become boring; it’s that they’re becoming boring in exactly the right way. The mythology is fading; the plumbing is taking over. And in finance, as in retirement, that’s often the moment when a product truly comes of age.
