way. Today's hedge fund panel with me. John Banham Way discussing why hedge fund should be in your Port photo in 2021. I'm joined today by Severe a Buddha fund analyst. Amplify Investment Partners. Bradley Anthony, chief investment officer, Fair Tree Asset Management. Jacques Conradi, chief executive officer and portfolio manager per Gram Capital, and Jon Pierre Pasta, founder and CEO Croshere Capital Management. Welcome, everyone. Hedge funds have had a lot of press in the last week or so. Cevera, I'm gonna kick up with you. Our hedge funds is dangerous Is the press have made them out to be? It's so fortuitous that we're having this discussion right after the amount of drama that we've seen in the U. S. For such for the last couple of weeks on bond. I think that to an extent, we need to consider the sort of different environment that they have to face. This is what we have to face. We were chatting about it just now. Is that the short off the requirement for short interest to be to be made known to everyone on who does that actually protect? Who does regulation protect when you have to make everyone's interest as transparent as possible on the answer that is, the market is because what happened is ultimately market manipulation, and we're trying to protect our market from that. Andi, We We know that that might happen in the future when we start needing to publish public, like interest in short interest and long interest. And I would I think hopefully we can maintain market protection and market efficiency to the extent that we don't have that issue. Okay, Shark, let's let's get to the nuts and bolts and we talk about game stop. It's been on every Bloomberg article, every Twitter feed that I've seen. What on earth is going on here? Look, it wasn't extremely interesting week and someone that just loves markets. That is my passion. I just kind of couldn't couldn't stop watching this. That was kind of I think it's one of those things in the 100 years history of financial markets. This week will be a standout moment globally, so I don't think we're making too big a deal of it. I think it is a big deal and it's a very interesting moment in the history of markets. So if we take it to hedge funds. I think what differentiates us from long only managers is the wider to set. We have available long, only very limited in terms of regulation with what I can do. That means, unfortunately, that could lace tools for gauging for protecting the fans and a good hedge fund managers should be able to use that kind of water tool set to generate better risk reward for his clients. Over the long run, however, it does also mean that a hatred manager that kind of doesn't know what it's doing or kind of it's not. Using these tools appropriately could lead to kind of more risk for its clients. So what happened here is a lot of these U. S. Funds obviously saw that Gamestop was a declining and dying business, which I think it's right, a physical store business that sells video games, eyes probably not gonna be around in the next 10 or so years. So I think they had that call right or everyone then happened. Is they all piled into the same bet as severe mentioned? We had 140% short interest. Soem or the entire company were shorted, which is just a crazy situation to get yourself into, I mean, one of our core risk management principles. As SFR assumes, the shares are highly concentrated short. You just watch from the sidelines. You don't get involved on the reason being that if everyone's really short to share the moment, you have any bad news on that company. A lot of people want to cover anyway, so the share doesn't feel like it should. And if there's even the slightest bit of good news or a change in sentiment, you will just get destroyed and potentially lose a lot of money. So I think most good hedge fund managers know that and should know that. So I guess what what happened here is these guys, while the traders right and games that might be around in 10 years. You just shouldn't be in the straight in this kind of size, because if if something good happens or if someone catches you out of someone starts pushing the share, you unfortunately are forced to cover your short position. So this was a very, very unique set up. It was the share with the most shorter's interest in the world that can't really happen in s side to a shared like Typically, we don't have nearly this level of short interest. So you can't get this. You need that very special set of circumstances off the high short interest and in an entire mob off millions of retail investors, getting almost a cult like following and then trying to squeeze is and that's obviously what happened here. And they all piled incorrectly identified that the hedge funds would be closed out of their positions and risk managed by their prime brokers. And they provide us on the way up. And this is what got what this very, very unique squeeze happening. I mean, the shares still with $20 I think in a few years it probably does trade there again. But it's it's basically sometimes just sit there with a popcorn and watch that we were just happy to watch from the sideline. Watch and learn and enjoy. Maybe yeah, Onda kind of learn from this experience of other people making mistakes. So you want to say something? I was just about to say, though, that it's so nice to hear from the hedge fund manager, the actual traders and hard is that they look at this just kind of possibility for it happening because and as an Allocator, you want to know that your hedge fund manager is not gonna, like be a Porsche with outbreaks and just going at it. But from outside, at least, we also know that compliance monitoring and just monitoring would have allowed our managers had they've been in a position like that to close up before. The risk of loss was too high on, but something that we try and make sure that any one of our managers that sits in our structures actually have to a deer to on what's going on. Go ahead, go ahead, read. Yes, I think it's very good point. You know, U N and Jack have made, I think, the key thing that is we so fixated on on returns Azaz participants in financial markets that we we lose sight of risk and I think sort of arm entries that we can't manage the returns. You can only manage the risk. And so when you think about the risk in in a situation like Gamestop, you have a situation where you can you can make it shorter stock. And that's short, interesting go you know beyond 100%. It's unlikely that will happen in South Africa, because we have to cover shorts. We have to think about what extent descript available. If you want to cover shoots, we have to think about. So what extent do we have sufficient cash available to cover additional margin calls? The volatility in stock prices increase. So I think, as each fund managers were constantly thinking about the risk associated with the positions that we hold, as opposed to just what the potential upside of the position is on DSO, I think, for for each fund managers generally because we have this wider toolbox a job was talking about because we introduce additional risk into the portfolio by using this wider to box. We acutely aware of this risk. And so way fall we farm or focused, I suppose, on managing risk through the entire process as well. J. P. I want to bring you in here, the toolbox you talk about. It's not just about having margin insurance. It's much more complicated than that, isn't it? Talk me through how you look at the short book when you run money? Sure, so yes, firstly, being able to short is the main additional two. But even in that is also it's called a linear versus non linear ways. Then you can expect the view by using options. And when we look at our short book, we prefer to buy good options rather than be outright short. But in the real world, depending on the level of volatility put options are quite expensive and they always have an expiry date. So you're actually making two goals. You're making evaluation call Recall that the share price will be lower, but you're also making a timing call because you need to be right by the time that could expires. Andi. So when we look at our short book where we can't do put options which, unfortunately in the in the South African context is quite often the case, banks don't write good options on anything other than the most liquid cheese. It means that we diversify our short book. We do not take concentrated positions, we monitor short interest, and when we do think that the prospects of the company or the tear writing at a lesser right or even stabilizing, we start covering and through that diversified approach and really looking at the short book as something that should help us with our risk management rather than being ah, high conviction source of return. We believe that helps to build a robust portfolio where lungs and are short interacting work together didn't give a good long term about average return. Shark JP mentioned position sizing on diversification. There's sort of aspects of shorting. Do you have a limit to how much you can short anyone stock in your portfolio? We do have a limit, the limited set fairly high. But I guess our internal risk limits are much lower. And I think maybe it gets down to the core off. How shorting is different from owning a position. If you own 100,000 rand off a share, let's set a shares first round. At worst, you could lose 100,000 rounds. If even if a bank fails, you can only lose the capital. You put in. However, if you are short 100,000 rands worth of Catholic deckchairs or angle American shares, if that short goes up three times or five times, you can lose 300,000 around 500,000 round on the case of games stock lose 15 times even what you put in. So that is the core reason why, as any his fund management worth his salt will know that the short book needs a different level of risk management than the long book. So again, like Jaber said, we're in a more diversified short book way, especially look at the liquidity of our shorts, which means, if anything, changes, can I within a day or within two days that it said most buy back to short and get out of this position. And typically we would like most of our shorts are probably 1 to 2% kind of positions, Joanne and occasionally in very liquid essay stocks, we might have a three or 4% position, but there will be a very liquid stock, very little short interest, and we're very sure within even a few hours weaken rapidly. Cover that position. So those other cases we will go big. Otherwise, you rather diversified short book. When the long side we often might have 7.5. 10% is that just doesn't happen in the short side for the reasons I discussed Sara. You look a hedge fund managers all the time. Has it been your experience that you've invested with someone that those rules were let loose on? They were, say, 5% shorter stock. And if that was the case, what did you do about it? Well, to the extent that during a due diligence process and trying to understand what a manager does and how they think about shorting and how it is that they deal with situations where the world is crashing and you need Thio, you need to actually be able to just manage properly where manager is going to deviate from what it is that is there just management rules. That's a very big red flag flies, Andi. I mean, they might be a position that drifted past their their limits. If they cannot correct that within the right time, if they can't if they can't be loyal to the risk management. Um, even in the ad hoc case, they can't. I can't trust them to actually be that way in the long term. So that's that's a very big red flag for me. If it's not part of your strategy and you're drifting away from what it is that you're supposed to be doing in an environment and in the situation where the world is crashing, or even in the normal circumstance, even if there's been no loss. If you're deviating from what your limits should be, that's already read like Okay, jeffy slightly different off topic here. But why did this happen? The first place is they're just too much liquidity sloshing around the system. Are there too many people stay at home and aboard. And now Robin Hood traders. What does this tell you about the world we're currently living in? This has become such a big story. It's part of it. I call it a Lollapalooza effect where effectively, it's a bunch off small things that just work together to give this amount amazing outcomes. So, as you correctly said, you had probably mostly young male board people sitting at home who might have got some money from the government through through unemployment benefits, who used to gamble and bet on sports. You couldn't do that because there's no sports because of lockdowns and who started joining chat groups on Reddit and became excited about the stock market together with that, you had a new platform that was attracting warm or Rettl interest saying you can trade stocks for free even though it's not really free because you're not getting the best price when the trades are executed on. Do you had guys like Roaring Kitty? You built up quite a following, telling people Hey, there's this There's the share with this short interest about 100%. It's all gang up. And it was small enough. Game stock was was a decent size that allowed this stuff, and all of those things work together. So So to your point, yes, we've got too much liquidity sloshing in the system where the in retail investors his own accounts, whether in central bank on central banks is balance sheets, whether in the excess reserves off banks themselves. You have even central banks for taking in markets. The if you look in Japan, for instance, the central bank owns the majority awful. The stocks on the on the Japanese Stock Exchange. Its's ridiculous. So yes, all this liquidity needs to find a home and short squeezes is one example off liquidity working together and and finding a home even though it's It's probably not sustainable, and all these short squeezes ultimately come to an end. And then someone needs to hold the bag, and it's gonna be retailing basis holding the bag. It has been aged funds. It's going to be retelling bases, so they're very few winners. The only winner is the executing broker that make more money from activity. All the rest of the place will probably be loses out of this. So can you go along Citadel stock because they seem to make a fortune in this? In this environment, if they were a public company, I would be buying. It's It's a wonderful model that got their hedge fund on the one side, the executing broker on the other side. So Ken Griffin is smiling, I'm sure. And they just back to the point about too much liquidity. Slotting in the system Long short is just one of the many hedge funds and offer you look across a wide range of different hedge funds. Tell me about different opportunities you're seeing that aren't necessarily directional. So before I answer that question, I just want to check in on the liquidity before I get there. I think you know, if you look at at what's happening in in in across the globe of the lost of last couple of months since the pandemic started on, do you compare the scoring to the economy? Visibly, the scoring to the economy in 2000 and eight? It's a lot more muted and and and then others on the other side of the spectrum. If you look at the stimulus that's come from central banks and from fiscal similar Sa's, well, it exceeds the stimulus that we experienced after the GFC by, you know, effect off 1.5 to 2 times. So so what you end up with is you end up with all of this excess liquidity sloshing around. That only leads to speculation. And so I think this, you know, Gamestop was a unique situation. There were a lot of factors that culminated in this event happening, but I would not be surprised if we see speculation pop up in other areas of the market as well of the next couple of months because, you know, you look at the U. S. For example, US disposable income is risen over the last year, and US consumption spending has fallen. So So people's balance sheets actually a lot healthier. They got cash. They board. I don't know what to do with it. I think we're going to see some speculation and so we must be aware of it. Um, from A from a relative value perspective, What we tend to try to do is is look for for relative mispricing of assets, and typically these are fungible or interchangeable assets to the extent that they can be the purest version off that is in the soft commodity market. That's one market in which way invest in we trade. And in the soft commodity market, you can you can look at to interchangeable commodities that are very similar but have different pricing characteristics and different liquidity characteristics. On DSO, you end up with a situation where you can get relatively surprising between too soft commodities. So let me give you a practical example. Um, this is just one practical example we can talk about many in the U. S. You can trade two different wheat contracts. They essentially the same. The one who's got a slightly probably about a 10% higher protein content than the other one is just listed on the Chicago Board of Exchangers Wheat on the other one is Kansas wheat. So typically, two different wheat, uh, riveters grown across the U. S. Um, that are very much interchangeable. What we have at the moment is that the lower protein content to wheat is trading at a premium to the higher protein content with. Now, you know, without knowing anything about soft commodities or or farming or the wheat market, that just doesn't sound right. How can something that as a premium quality traded to discount to something else? And so those the opportunities that we constantly looking for in the market, whether that be in the wheat market, whether that be in equity market, will be in the fixed income market opportunities arise, which are non direction, Um, and and those are the ones that we that we really really drawn to because it means that we don't have to necessarily take a view on market direction in order to generate offer for for investors. Okay, we know there's lots of liquidity on Brand is talking about you confined opportunities that without being directional, we've discussed shorting to a large extent this morning are you reducing your shorts and your portfolio is the moment, both locally and globally, because of how much liquidity and fiscal spending is out there. So you and something I think we've probably bean identifying in our friends in the last six months is that environment, with more liquidity and more retail investors, is clearly and more risky wanting do individual shorts in I think I don't think you what I want to stop shorting completely. But individual names shorts could be kind of kind of attack by these mobs or typically, unfortunately, right now, the way it also is the company's you ideally want to short. The weaker business models are already trading and fairly depressed valuation. So even even though it might be a good long term, short evaluations are really reflecting that. So probably for six months or so we've been switching are short book from more individual names short into mawr index shorts to, I guess, protect us from this risk and just have a smooth, smoother profile on the short side. It still allows us to then take great opportunities on the long side of heads that with indices or on the like on the short side, so it's still allows us to make our long Alfa. But we've admitted that in this specific point in the cycle, it's harder to make Alfa individual stocks struck shorts. And I think one of the key things about kind of running the good fundamentals and businesses. You've got to be aware of the changes in markets, and I think this liquidity point you mentioned low rates. That is a real structural change, but we don't think goes away rapidly on. But I think it kind of leads to all kinds of different issue. That leads to clearly bubbles in some areas, like it's a game stuff in the last week. But maybe things like Tesla's stock and certain, like small cap technology shares are clearly trading it pretty insane valuations. So we have a market where this, in our opinion, kind of bubble type levels in the small pocket of it. But it doesn't mean there's bubbles everywhere. If anything, we think some large cap names, especially large cap pictures, for example, are still actually we think below favorite value looking, where rights or on where bonds are trading Onda. Guess then, on the other side, you've got kind of some famous people being, let's say, Jeremy Grantham from GMO and others calling for an overall market bubble, saying overall market levels were too high. We don't agree with that because we think the structural change in interest rates stayed around what will hang around and for major allocators my pension funds, there simply is no other option. You've got to be in cash, bonds or equities if the bonds and cash or giving you negative real returns. Unfortunately, you will have to pay slightly more for high quality equities that we have over the previous 20 or 30 years. So you always think it's dangerous to say this time is different, But I think our viewers, in terms of the interest rate curve and where rates will be, it probably is different for an extended period of time. And you've then got a somewhat reconfigure how you think about markets to optimally operating that kind of environment this time is different. Shark hope those words don't come to bite you, jp. Okay, so following on from what doctors said about liquidity is plentiful. Interest rates are low, It obviously makes shorting or difficult. Do you concur with that view. Have you changed anything in the way you run money? So it has made it more difficult in a few guys. One of them is when it effects are lower when you short shares your rebate or the return you get from investing. The cash is also quite a bit lower, so so it does make it more difficult to short. We have also moved more towards index shorts, but it's mean it's been tough because what we've seen since I would say vaccine Monday in early November is that there's also been a bit of a quality crash and our normal way of our portfolio construction is to be long above average quality companies in short, mediocre companies. But mediocre cos the last three months have outperformed the high quality companies and you see that in in the index and that means that our index shorts that actually hurt us a bit over the last three months on the long side. Similarly, we also think that it's very expensive in general, these high quality companies also because rights also allowing the liquidity what you see. The biggest impact off that is companies where the cash flows are further into the future that we have the biggest impact of a lower this country, so much so that we think high quality, high growth companies are very expensive. So it's been tough on the short side, but it's particularly tough on the long side because we're holding on to these great companies that we really like. But they shares are very expensive. Eso ITT's not being an easy time to be agent manager, especially one that uses valuations, a compass to decide we chase to belong and we chase to be short Onda uh, there are a lot off interesting questions being posed by the market that Asians managers need to solve, including whether these Low writes really necessarily lead sustainably higher evaluations. Because you haven't seen that in Japan, for instance, over the last 40 years since the mid eighties, where interest rates have been almost zero, but the valuations haven't really picked up, so it's it's a tricky environment at the moment. Bradley and I just I was going to concur with with John E. Think the challenges if you looked at the stock markets on a cross sectional basis, so what I mean by that if you if you listen all the all the shares in the stock market on a daily basis and you looked at their price movements. And instead of doing a standard deviation calculation on a time series of one, she you do a standard deviation calculation on the cross section of shares within the stock market in a given day. That gives you a measure called cross sectional volatilities, or dispersion and typically for stock because in most of the African equity fund managers of good stock, because so for stock, because you want an environment where there is a fair amount of dispersion within the market because that is a healthier, ripe opportunity set for you to go and pick stocks. The challenge with a market at the moment is that dispersion is exceptionally. I it's almost unaltered. My, But that dispersion is, as a result, off the factor bias in the market. So the so the let's call it the cyclical versus the quality factor bias, where we're quality stocks on DMA momentum stocks and growth stocks ran for so long until vaccine Monday, and then everything turned around. So now, as a stock picker, you need you faced with the challenge of having a short, really good quality companies, and that's difficult. So what do you do? You try to then try to then total private and short indices. The problem is that when there's a rotation in the market, the index doesn't collapse, the index kinda holds up. And so you end up with this difficult situation that you actually don't have a hedge. So so what we're doing in our funds is we also perverting towards some index edging. But we actually just bring in leverage altogether because from a risk perspective, that's the only way you can actually manage. The outcome is by its very reducing literature. Reduced position. Size is reduced overall leverage in the portfolio. Shark, brandy something very interesting. They're reduced the leverage in the position sizing. I think I'm hearing that from all of you. Who was the famous hedge fund in the last two weeks. I said they had no shorts whatsoever. Can you remember the name? I think suddenly now hedge funds don't want to admit to shorting of J. P or Bradley knows. Um, I think etcetera on that said they're not going to issue short research anymore. They focus on long research. Or isn't that a fascinating? That's probably the perfect time to start shorting when no one wants to admit to shorting a severe. It could bring you in here on the kind of the allocator of capital. Are you finding the hitter managers? You're speaking. Thio, by and large are struggling at the moment, the markets to find things to short because markets are so momentum driven. I don't think so. I mean, to the extent that there needs to be opportunity. But it does go back to Bradley's point on relative positioning on um, even though they might be some moments and existing, um, shorting does play its role in relative positioning, and managers have been able to find those those positions. And he got Alfa, even though it is, ah, prevalent a multi momentum in the market. It's mispricing that that relative change that helps them he got the performance and then back again. Thio, you're kind of going out there educating people on hedge funds. Are you finding the average I F. A or the high net worth individual are much more learned now on hedge funds. Is there still a lot of long way to go. Oh, definitely. I think we've come a long way and getting people to understand what it means to invest in a hedge fund and the kind of risk that that they're taking on. Um, that's why it's so very, pretty sweet situation for me as an Allocator. Having what happened is that that kind of thing is probably not gonna happen to anyone that invest in our hedge funds because we play such close attention to the risk management on the compliance off our managers. So in the in the way that hedge plans is now being like attached to something negative, it's the detract er. But I hope that that means that our investors in the retail market, in the local and the local industry can look at our performance and look at our managers and see that that's not just they need to worry about brandy with. He's seen some phenomenal returns from hedge funds in South Africa the last couple of years. What happens when becomes more mainstream? Are you concerned? Return start to fall? I'm not concerned. Returns started full because I think that we have. We have very prudent age fund managers in our market. So maybe it's a good Segway even to start talking about fees. But let's not Let's not open that kind of woman just yet. So most age fund managers in South Africa tend to be very prudent about capping the size of their funds on DSO, even though we become more mainstream, I think most age funds would not find themselves in a position where they raised so so large and asset base that they are unable to deploy the investment process in their trading strategy. To the extent that they've seen that they've been able to in the past. And you got to remember, I mean, whether you believe the later stage fund survey numbers or not, it's still reflects a meniscal, um, asset based relative to long only funds so that the last number that I have in my head is around 65 billion rand or thereabouts. Vizzavi along only savings industry in South Africa that runs north of three trillion. So so we are way have a long way to go for each wants to get so large that unable to deploy the investment processes effectively, Cevera oversees the experience I've seen is when hedge funds went from monthly dealing to daily dealing returns full. Why do you feel that the strategy is here will still work for daily dealing in South Africa? The simple explanations that is the difference in size off the market is that we have a smaller market. We have, ah far more liquidity in the spaces that our managers operates. I think that goes back to understanding what a manager does and where it is that they find their opportunities and the different niches and skillful managers sort of find that as a repeatable process. And if you can understand that about a manager, um, the the dealing becomes, ah, part of management becomes a part of training. It becomes a part of their style and their strategy on. That's why I think that locally, I mean, like, Bradley said, way still to get there were still to get to such a large market where that might be a problem, but we're still in a great space to actually un but where we are okay sharks. They were hearing that the market is big enough for all of you. Do you cap your funds? I just quickly wanna kind of respond on the daily deal English, and I think for us a very key part of it is to If you wanna have daily dealing funds, you must not let it affect your time horizon and as invest because we think that is a road to certain ruin. If you start thinking shorter and shorter term and you want to manage daily weekly Man's return for your clients, that's gonna let lead to bad decision making and not making the optimal long term decisions. So I guess our model is always make appropriate long term decisions. Kind of 123 year decisions are typical karma rise and for investing. And then you've gotta have the emotional fortitude and the quality of a team to be able to arrive. These short terms things and especially, as Bradley mentioned intraday dispersion is high. So every few days you feel clever, and then the next day you feel stupid again because your shares under performing and you need to have the mental fortitude to not let that affect affect you and to say, I've made the right calls over one year to your eyes and I'm gonna make fantastic returns for my clients on stick with that, even if if you have a tough month or a tough two months, if you've made those right decisions, you'll get through it. You also obviously need to make sure that you communicated that to your client base. And you've got a diverse apart enough client base that they understand your approach and that they're willing to see through short term noise. We don't think if you try to manage like monthly numbers to clients, you're just gonna end up delivering very poor returned so potentially globally. If, if that If the shorter term, daily dealing funds led to behavior change for fund managers, you can clearly see what that could lead to bad outcomes. So while we have daily funds, I guess we we've kind of told people we will continue our normal approach of making probably two years average decision time horizon, and we're gonna stick with that. We're not gonna We're not gonna change that left the shorter term dealing effect that so what you don't just need to make sure is that you are in liquid enough shares to be able to handle the daily inflows and outflows. And during the past, probably 12 or 18 months, we've pivoted our funds to be more focused on offshore opportunities, not because of liquidity or fun size of daily dealing, but just because that's where we see the opportunities. Right now, we think it's probably one of the best times in history to be a stock picker. There's so much change happening in the world and global economies and the products people are using on. Unfortunately, there s a market just get doesn't give you access to the businesses that will be the business of the future. So we've made that change, and because of that, I think we have no issues with current liquidity. And I think we will keep monitoring this and discuss capping it at potentially time the future. But for now, I think we've got plenty of liquidity. We can handle that kind of huge inflows or outflows on on a daily basis without impacting anything. Randy, you wanted to say something. I actually again Jock Jock mentioned it there, but I think what What the GFC taught us for those of us who were around back then is it was a Ballengee crisis and and so taught us about asset liability matching on DSO as a fund manager to run a daily fund. Um, in, you know, let's say, a pan African product. Um, that's the typical mismatch that you want to try to avoid. Um, you know, relatively illiquid stocks in a daily traded fund can lead to can lead to trouble. So So? So I guess the daily traded, um framework or vehicle is not the issue. The issue is whether the H fund manager is prudently matching his assets and liabilities from a liquidity perspective. Andi, think Jack's alluded to really Jeffrey, I see you nodding along eyes capacity, something that concerns you at all. Or do you have a global remit? We run roughly 800 million Randolph age fund assets, so we are far away from any capacity constraints, and we do get. Then we do see that liquidity becomes an issue. We will cap our funds also because our performance restructure incentivizes that behavior. We make a lot more money when we perform. This is making money from gathering assets on day. Therefore, when we get to the point where I think size inhibits returns, we are incentivized to make the right decision for our investors. Similarly, Reef perverted to more offshore markets as well, because there's more opportunity, a lot more liquid. So we are also not looking at any liquidity constraints anytime soon. And as a final point to the issue of liquidity, I would say that South Africa is not unique in this regard. You can look at Europe H two out, for instance, and a few income funds and some other liquid alternatives that created age funds within the use, its environment and the returns weren't as good as their historical products, and some of them run ran into liquidity issues because of the daily dealing funds. So this is a worldwide problem, and the solution is exactly as Bradley I said, What are your assets? What are your liabilities? What's the liquidity? They're off, and the way you run into problems is you offer daily liquidity on redemptions, but you can't redeem will sell your assets on a daily basis within the fund. So as long as H one manager is cognizant of all these risks, and that is job number one for any age fund, it's risk management. You should do okay. And I can tell you all of the Panelists today or investors in their own funds, we eat our own cooking and therefore the interest once again are aligned. And we look after the investors Well, because we're looking off for our own money. Well, as well. Cevera, do you monitor this asset liability matching within hedge funds that you monitor? What? What is your risk tools that you look at? So just before I answer that question, I guess I wanted to reiterate the concerns and capacity is like we've all said that we still think we're quite a distance away from reaching to large sizes. But I think that I have to agree with JP when he says that if we ever do reach a point where it is that the final managers need to need to close, that's not something that we should try away from because the alignment should be with the client's interest. It should be performance on it should it shouldn't simply be as to gather is that that's that's something off import to us. You look at all these hedge fund managers, but they're not on your books. And on your balance sheet. Where? How do you look at the risk You risk report every day. Who defines risk of the funds that you're monitoring? Because clearly, if there's one thing that's come out of today's discussion returns of one thing. But when it comes to hedge funds, risk is very important. So how you monitoring risk? So I think that the first way I like to call it like the layers off appearance, the layers of cognizance to they're just management and how committed they are to that. The first step is obviously understanding how management thinks about risk, whether they use stop losses, whether they re evaluate positions when prices started for that kind of thing, you understand, before you even invest in a hedge fund of you, select somebody. But on a more daily basis is that we have independent compliance and risk management numbers that come to us to see whether manager has reached any kind of value at risk, constraint or counter party, a constraint or exposure constraint. So where all the time, um, sort of a way off that on a more regular basis, so sort of every quarter every month? Sometimes you might just check in with the manage to say that you're deviating from the expected return that you might given your style, given the environment, Why might this be happening on? That's how we can further monitor risk and sort of risk that the managers taking By all means, tactical bits are, ah, welcome. But appearance to style is also what it is that we're looking for from the manager, um, or sort off formal basis is that you look at contributors on the tractors off return. When a manager has had a really good man, they're really bad month or period of returns. And you're asking, what? Where did that come from? Why is that? You did so bad. Why did you so amazingly well, can I expect this again? And you consider the kind of risk that that they have taken on and whether that's in line with their style and in line with what you should have expected? Because even that is a red flag where they're sort of taking bets where they shouldn't be taking it, taking on risk where they shouldn't be taking it on. That's something we need to flag before something bad happens, and that's my purpose. That's my job. To identify that. Figure it out before it happens on. And I'd like to think that that's where games off, like all kinds, wouldn't have bean victims of that kind of thing because where managers taking such a such a large, naked position that would have been flag long ago, you know, risk management and compliance. Okay, so there you reminding me that maybe people should by hedge funds without someone like you looking at them, that's what we're trying todo that gap in showing someone what it is you should choose on finding those skillful manages for them. So I get questioned to all of you. Maybe. Do you think hedge funds are there to protect the downside or their thio get better? Make more money than equity managers? Are you risk plus or risk off? I mean, I just don't understand what you guys sit in. If I choose a hedge fund, um, I'm looking for something to protect me or something to give me fantastic returns. I think in general what we talk about, what we try to maximize is a risk adjusted returns, so that could mean multiple things. So let's say if I look at our two main funds or pure hedge fund has been to give you a low double digit returns 67% above inflation. It's never had a negative year in 22 years, and it's given you, like, 60 times your money out of that time. So that is, I think, a great return while really limiting the risk. And then we've got a high growth and when we take somewhat more risk. But then we want to do better. We wanna do kind of 15 20% kind of returns for clients. So it's all about can you, for a certain level of risk, deliver much better returns than other money market fund can or in equity fund can or a balanced fund manager can. So basically per unit of risk can you deliver fantastic returns? And that's our goal. And and so I think risk is always part of it. But obviously you can't No one wants, like no risk, but but now return. So you've got how do you deploy that risk budget into giving clients the optimal outcome in various market circumstances? But but no doubt, something like the first quarter last year. Our clients want us to do much better than the marketing. And when the markets down 25 I think I'm market mutual fund was actually up that quarter are high growth funders, maybe down six or seven. That's what clients want. They want you to protect on the downside. But then I think I mean, clients expectations are high, so they want in your high risk funds. They want you to also beat the market. On the upside. On DSO, I guess clients always want best of both, and I guess we tryto deliver as much as we can. I mean it in that direction. Our clients not looking for Nirvana here. I mean, you've got to be careful. What you want are you can't expect Havel. This high returns, but they never no downside at markets. Despite what hedge funds trying to sell us. That's not true, is it? Yeah, Look, it's it's It's not possible to give clients no downside, so we tell clients if they want the product where they could get beat equity markets in the good years, you've got to take some downs that it's not possible unless the guy kind of Aziz running probably big tail risk or got some strategy that could blow up in some year. If you're taking world price risk, there will be times from the market sells off when that will be down. So I think communicating that with clients and getting clients in the right product for the risk appetite is very important that plants don't wanna lose money. Then you could been with the best. We can do this kind off inflation plus six or seven while not losing your money. If you want more than that, you have to accept some volatility and downside risk because we gotta take bigger positions in our base side used to give you that outcome. So it's, I think it's communicating with clients and explaining the risk reward to them. But, like you said, there is no nirvana. Your and often I think Nirvana's in in badly. Unfortunately, Bradley, you wanted to say something. Yeah, I think I think a panel like this perpetuates the wrong perception around age funds. Why did I say that? Because we have a huge front panel. We don't have a low volatility age front panel and a high volatility age front panel we'd never put a fixed income manager or money market manager on the same panel is an equity manager, so we don't distinguish for for the views of Let me talk before I often say it. Funds are not homogeneous. They not. There's no one hedge fund. There's no one way to describe it. Funds you could get, get get rich hedge funds you could get stay free church funds you know whichever way you want to label these things. And and so I think the challenge for us is if we try to describe this this amorphous category off investment styles in one way you know what what we do is very different to what Jon Pierre does very different. What job does very different, what severe does when she looks at a different at a different managers, So they're very different styles that can be applied in very different ways. We use similar toolboxes, but the way in which we deploy those two boxes off very different. So we have in our stable off which funds we have funds that that seek to outperform the market, and we have other stable other funds in our stable that seek to protect investors. Wealth on DSO You need to you need to distinguish it from the different types of hedge funds out there, I guess. Bradley, to your point, I think you've been a bigger when they're not all hedge funds equal. I think people need to be very aware of what they're buying when they buy a hedge fund. They're looking for upside or looking for downside protection. So JP coming, you coming in here? You've had a very successful track record of running hedge funds as we sit today. If you would advise somebody, would you be telling them to go more aggressively into the market or to be more market neutral? They're not take too much directional bets. Well, it probably depends on the risk appetite in the type of money they are applying towards those two goals. Whether Maura lower risk approach, low volatility in the in the capital or higher risk approach really go for are performing equity markets. And no one approach we've seen something basis do is evolve. I'll approach when they say Okay, this hatred industry has only been regulated for a handful of years now. It's still relatively early days. We're gonna have a core satellite approach or about barbell approach when we start with some traditional investments at the core of our asset allocation and at the fringe at the satellite will make the location to a hedge fund and we'll test out the waters. And over time, as they become more comfortable with each funds, they increase that allocation to the satellites. And they get a good feel for exactly how those returns that the ancient managers generates are generated. And then they make their assessment based on that. So there's not, I think, one answer to say you should give money to hedge funds because they are not a homogenous has, Bradley says. No, I completely agree with that. I think that's maybe the most important point off this panel. But I do think there are hedge funds out there with very good long term track records that have justified in the past the trust of the in basis of putting them and have really rewarded and delivered that other returns that they in basis would have wanted and probably exceeded a lot of the expectations. And they are risk. They are veterans out there who don't apply good risk management who have closed down, and we don't see them here today because off survival, sure buyers. Andi. Therefore, whenever one considers investing in hedge fund, it's the age old principle of saying, Understand what you're investing in and you're not investing in a category. You're investing in a specific fund and make sure you understand what you're investing in. But they are very good agent managers out there that you can understand what they're doing. They have been doing very well for years in the past, and they apply the same process today that is delivered in the past, and hopefully that means they'll deliver in the future as well. Okay, so the hedge funds for any kind of investor, if you want some conservative or aggressive, it's up to you to define your own risk parameters. Now let's get the question. None of you ever want to answer fees. Cevera. You're obviously going out there allocating capital. The hedge fund managers. What are the discussions on fees? Talk to me about how you handle capping of performance fees. Just talk to me about the feast discussion like you said, like fees have bean what's made hedge funds so infamous such a long time. I think amplify has been lucky in that we've had such a long history of investing in hedge funds and been able to garner relationships with some of the best award winning hedge fund managers in the country. That to the extent that we're both institutional and retail investors, we've been able to go to the manager and say, like, this is this is the market and this is where you can penetrate. This is how you can gather assets. You have to, alas, to you that for you, But that means that we have to negotiate on these. I think investing on institutional plan has given us the cloud. I think to negotiate with managers and be able to do what we do and do it well is that we can go out there and find the best manages partner with them for the long term and then say like, this is what we're going to do. We're going to take you out to the world, make you accessible to everyone on DATs. How we're able to sort of minimize the fees is that we share with them. So this be searching for the most skillful managers out there and then monitoring them all the time, making sure that their loyal and committed to their risk management all comes into all the funds that we have on board. None of our funds are actually more expensive than a fund retail. Investors would go if they have to go directly to that manager. There's so many value add added benefits to investing in that way. Um, go to a skillful sort of multi manager, um, that can select the best managers for you on regulate them. To a certain extent, I'm still pay fees on bake. Sure that it's it's competitive. It's competitive fees. Sure, Um, look so well, maybe just share our philosophy and fees. And like this as a fund manager, let's say myself, for all its a job here, when you set up his business, you could decide, Do I want to be a smaller returns focused businesses that going to be better for my clients or don't wanna be a large manager with lower fees, But due to my size, I'm inevitably likely to generate much lower Alfa. We think clients will end up being much more wealthy at the end. If they pick, the high quality manager has chosen to be small, more nimble and will deliver better returns. So I guess despite our admittedly higher than long only feeds the hedge fund. Our clients have been much better or for a net return bases over the last 20 years. I think if you look at our growth fund had you invested in the old Z and all the index fund, a million ran in 2000. It's worth about 11 or 12 million rand now. Had you pick the very best unit trust live low fees, high fees, equity fixed income, the very best one. That one million rand is worth about 25 million rand now, which is a great result high growth fund. After all, AFI's 100 rand is with about 100 5 million rand were moderated, with about 100 5 million not off to a late fees. So I guess that just clearly shows you net returns. After all, these is the only thing that's dramatically clients. Obviously, some people kind of don't get this, but you can choose. Do you wanna be with a large manager or the index fund low fees, no excess return or pick the manager. That's chosen to have the best team, small assets and to work very hard for your returns on a daily basis that that's the choice clients have to make broadly, I agree. I mean, I think there's a There's a distinction that needs to be made between price and value, and that's That's what joke was trying to describe. Now, you know, if you're looking for the cheapest price to invest, you need to go to some sort of index fund to eat f. What I can guarantee you is that by going for the cheapest price, you're going to always underperform the market. So if you buy a market e T f, and you pay one basis point for that, you will underperform the market. Or one basis point is that if they TTF is able to replicate the market effectively, um, so you you curtailing your ability to generate additional returns or excess returns. So the question to Mama and should never be about price. It should be about value, which means that people needed a son with with all other purchases that we make, we constantly discern between price and value. You know, if I'm buying myself a new vehicle, is this good value? What are the features? Etcetera, etcetera, etcetera? When we invest, we seem to forget that argument. We seem to just look at what the total expense ratio is of the total investment charges. And and the point that jock makes is that if you know, we've seen lots in the media over the last 23 years about the the negative compound effects off fees on your overall returns over time. So if you take an additional 200 basis points per annum off your return, how does that negatively impact you over 2025 year period? Nobody does the calculation of adding 500 basis points of author to your return and compound that over time because that's the distinction. The distinction should not be price. It should be value. So if my Net returns is getting me to a point where I actually am generating additional access returns, which compound positively over time, that should be a consideration. And then the final point I'll make on this is that, um, the challenge if we if we go down the road off trying to squeeze this business model of edge funds, which are typically Jacques is described small Anisha pools of capital, which are looking to generate excess returns. If we squeeze this model into oblivion and we squash fees altogether, we remove this tool or this vehicle from an investor's available opportunity set J P. I just wanna have quickly. I don't if you want to add anything to this discussion, I think it's been very well covered. But if you want to just add a few comments, sure I'll be quick. I think the first one is they are still I phase and other investors when you put a faction in front of them, their eyes first go to the TR ratio before it goes to the after fees return ratio. I think some education needs to be done in that regard, because what the passive industry has a sort of done, and I'm a fan of the passive industry, but they've sort of said focus on the fees because you can't control the returns and this is important. But for all other things being equal for the same level of returns, you will get a better after fee returns But the problem with that thesis is all other things aren't equal. It isn't the same return before fees and H ones have the opportunity to deliver and above average return before fees and still above average return after fees if they do a good job, as many hedge fund managers have in the past. So please look at the returns after fees before you look at the TRS showing affection. Thanks, everyone. I've learned an awful lot about hedge funds today on. I'm very pleased to hear that there's proper risk parameters in places in Africa so that a Gamestop won't happen here. I've enjoyed your insides into the fact that are all hedge funds the equal thanks very much for your time today.