Hedge funds are actively managed investment pools contributed by a number of professional investors with the aim of making profits or returns irrespective of economic tidings. The funds are accessible to only accredited investors and their strategies may include long or short equity, equity market neutral, merger arbitrage, volatility arbitrage, global macro and convertible bond arbitrage.
Hedge funds can be structured as a Limited Liability Company (LLC) or Limited Partnership (LP). For one to start or manage hedge funds in Kenya, he/she needs to acquire a license from the Capital Markets Authority.
Characteristics of Hedge Funds in Kenya
1. They are only available to accredited investors who meet certain net worth requirements, particularly $1 million or have an annual income of $200,000. The value may vary depending on the hedge fund policies.
2. Hedge funds can invest in anything. They have a broad investment base.
3. They invest aggressively using leverage or borrowed money to increase returns.
4. The hedge funds have a ”two twenty” compensation scheme that gives the hedge fund manager 2% fund management fee and an incentive of 20% of the profit or returns generated annually.
Types of Hedge Funds in Kenya
1. Macro Hedge Funds
They invest in stocks, bonds, futures, options and currencies, with the aim of profiting from changes in macroeconomic variables such as countries’ economic policies, global trade and interest rates.
2. Equity Hedge Funds
The funds hedge against declines in equity markets by shorting stock indices or overvalued stocks.
3. Relative Value Arbitrage Funds
They are funds that take advantage of price differentials or inefficiencies between financial instruments that are related.
Hedge Funds Companies In Kenya
1. Amana Capital
Amana Capital is a fund manager licensed and regulated by the Capital Markets Authority and Retirement Benefit Authority since 2003. It manages unit trusts, pensions and provides wealth management services to individuals and institutions.
Contacts: 0721 700 076, 020 235 1738.
2. Fanisi Capital
Fanisi Capital targets industries in the agricultural, energy and healthcare sectors, with consistent profits posted.
3. Sterling Capital
Sterling Capital is one of the leading investment banks in Kenya that aims to meet the needs of institutional, corporate and retail clients by providing inspired financial institutions.
Contacts: 020 221 3914, 020 224 4077.
4. Savannah Fund
Savannah Fund is a seed capital fund specializing in US $50,000- $1,000,000 investments in early-stage high growth technology startups in Sub-Saharan Africa.
5. Novastar Ventures
Novastar Ventures is a venture capital manager dedicated to finding and supporting the next generation of exceptional entrepreneurs designing and executing innovative business models to profitably serve Africa’s mass markets.