Fairtree’s Kamini Naidoo says multi-strategy hedge funds can help investors access diversified
sources of return, manage volatility and build more resilient portfolios.
For many investors, hedge funds still carry a reputation for complexity, exclusivity and elevated risk. Yet Kamini Naidoo, Head of SA Alternatives and Multi-Strategy Portfolio Manager at Fairtree, says this view misses how significantly the industry has evolved, and how diverse these strategies are.
In today’s market environment, she says, hedge funds should not be viewed as a single, uniform asset class. Rather, they represent a broad set of specialised investment strategies with different risk profiles, return drivers and portfolio roles.
UNCERTAINTY CREATES RISK AND OPPORTUNITY
This distinction is important in a market environment shaped by persistent uncertainty. Traditional investments remain the foundation of most portfolios, but periods of uncertainty can increase the value of complementary strategies that are less dependent on one market outcome.
Naidoo says hedge funds can play an important role in a diversified portfolio by providing access to differentiated return streams. Depending on the investor’s objectives, they may be used to enhance diversification, manage downside risk, improve portfolio resilience or pursue additional sources of return.
MULTI-STRATEGY HEDGE FUNDS ARE FLEXIBLE
One of the most relevant approaches in the current environment is the multi-strategy hedge fund.
The objective is not only to diversify the assets held, but also to diversify the sources of return. By accessing opportunities across equities, fixed income, commodities and other strategies, these funds are designed to adapt as conditions change.
The flexibility of the hedge fund mandate is central to the proposition. Unlike traditional long-only strategies, hedge funds generally have a broader investment toolkit. Managers may use short selling, derivatives and leverage, and can actively adjust exposures as new information emerges.
This can be particularly valuable during periods of market stress, when dislocations and pricing inefficiencies may create opportunities for skilled active managers.
REDUCING PORTFOLIO VOLATILITY
From a portfolio construction perspective, many hedge fund strategies have historically had lower correlation with traditional equity and fixed income markets. This can help reduce overall portfolio volatility and improve diversification.
“At Fairtree, we view downside risk management not as a separate objective from return generation, but as an integral component of the investment process,” says Naidoo.
The South African hedge fund industry has also changed materially over the past decade. In 2015, hedge funds were brought into the collective investment scheme regulatory framework under the Collective Investment Schemes Control Act. This improved transparency around fees, performance, liquidity and risk management, while strengthening governance and investor protection.
BROADENING ACCESS
The introduction of Retail Investor Hedge Funds has also broadened access, while Qualified Investor Hedge Funds remain available for investors who meet the relevant requirements. Fairtree provides access to hedge funds through a range of structures, including retail, qualified investor and US dollar-denominated options.
Naidoo says when selecting a hedge fund manager, it is critical to look for clearly defined and repeatable investment processes, a robust risk management philosophy, an experienced team and a long-term track record across market cycles.
HUMAN JUDGEMENT STILL TOPS AI
Technology is also playing an increasing role. Artificial intelligence and machine learning are being embedded across the investment value chain, from idea generation and execution to risk management, data infrastructure and reporting. However, Naidoo says human judgement remains central.
Fairtree uses technology to enhance its investment process and reporting capabilities, but views AI as a force multiplier for investment professionals rather than a replacement for their expertise.
SA OFFERS OPPORTUNITY
South African and broader emerging markets offer attractive opportunities for hedge fund managers, as many in the industry have demonstrated. These markets can experience more volatility and more frequent pricing dislocations than developed markets, creating a richer opportunity set for skilled active managers.
Naidoo believes South African managers can have an edge in understanding emerging-market drivers such as commodity cycles, currency dynamics, capital flows, and political and macroeconomic shifts.
Looking ahead, Naidoo expects hedge funds to continue moving further into the mainstream as investors recognise their value within diversified portfolios. Globally, multi-strategy hedge funds have continued to grow as investors seek a single access point to a wider range of hedge fund risk and return sources.
For Fairtree, alternative investing has been central since its inception nearly 20 years ago, with a hedge fund as its founding strategy. Today, its capabilities span traditional and alternative investments, including unit trusts, hedge funds, private equity, operational real estate and infrastructure.
ABOUT KAMINI NAIDOO
Kamini Naidoo joined Fairtree in 2026 as Head of SA Alternatives and Multi-Strategy Portfolio Manager. She has extensive experience in alternatives and portfolio management, including 17 years at Momentum Investments, where she managed alternatives portfolios and led the hedge fund business. In 2024, she was appointed Deputy Chief Investment Officer at Momentum Multi-Manager and Chief Investment Officer of Equilibrium. Naidoo holds honours degrees in computer science and financial management, a Master’s of Management from Wits Business School, and is a Chartered Alternative Investment Analyst charterholder.
Hedge funds move into the mainstream
Amplify’s Wade Witbooi says hedge funds are increasingly being used as portfolio construction tools, helping investors diversify sources of return, manage risk and navigate more complex markets.
“The way investors and advisers think about hedge funds has changed in recent years,” says Wade Witbooi, Managing Director of Amplify Investment Partners. “Rather than viewing them as high-risk products, they are being seen as tools to build more robust portfolios.”
The regulatory framework for retail hedge funds was introduced in South Africa in 2015, bringing these funds into the collective investment scheme environment. However, the shift in market understanding has been more noticeable in the past five to six years as more industry participants have entered the space, financial advisers have become more familiar with the products and access has broadened.
INVESTING IN MORE THAN ONE DIRECTION
For Witbooi, one of the important hedge fund differentiators is that they can invest in more than one direction. While traditional long-only funds typically benefit when markets rise, hedge funds may also use tools such as short selling to express a view when markets fall or when securities are mispriced.
But this does not mean all hedge funds behave in the same way. Some managers may thrive in volatile conditions because volatility creates dispersion and trading opportunities. Others may behave more like traditional funds, depending on their mandate, strategy and portfolio construction.
MANAGER SELECTION IS IMPORTANT
This makes manager selection and strategy assessment particularly important. Some hedge funds may have low correlation to the broader market, while others may have higher correlation. Understanding the return drivers, risk profile and role of each fund is central to using hedge funds effectively.
Witbooi says one of the persistent misconceptions is that hedge funds are opaque, speculative or casino-like investments. In his view, the word ‘hedge’ remains important. At its core, a hedge fund should be understood as a strategy that can provide protection against what is happening elsewhere in a portfolio.
REPEATABILITY IS A FOCUS
For Amplify, the focus is on repeatability of investment performance, established track records and the quality of the investment teams behind each strategy. Witbooi says the business does not simply launch hedge fund strategies from scratch. Instead, it partners with specialist managers who already have tested processes and demonstrated an ability to generate returns over time.
Amplify offers nine hedge funds, each following a specific strategy. These form part of a broader range that includes local and global long-only funds. Witbooi says the partnership model allows Amplify to identify skilled managers and make their expertise available to a wider South African investor base.
CAREFULLY MANAGING CAPACITY
As hedge funds become more accessible, the industry will need to manage capacity carefully. Witbooi points out that scale can become a constraint in active investment management. The more money a manager has to manage, the harder it be to move quickly and exploit inefficiencies.
“In investment management, scale is traditionally thought of as the enemy of alpha,” he says.
This is particularly relevant in strategies that rely on identifying anomalies or mispricing in the market. If a fund becomes too large, the manager may become less nimble, and the ability to generate the same level of alpha may be reduced.
THE CHANGING INVESTMENT LANDSCAPE
Technology and artificial intelligence are also changing the investment landscape, but Witbooi cautions against viewing technology as a source of automatic advantage. If many managers adopt similar tools, the competitive edge can narrow. The differentiator remains the ability to identify and act on mispricing faster and more effectively than others.
He describes the future as a combination of human and machine: technology supported by human judgement, institutional memory and investment experience.
ESG considerations also apply differently to hedge funds. Governance is often the most relevant component, particularly because hedge fund managers can use short selling to express a view on poor governance, accounting anomalies or corporate mispricing.
THE FUTURE OF HEDGE FUNDS
Looking ahead, Witbooi expects hedge funds to continue becoming part of the mainstream investment conversation. As passive investing grows and traditional markets become harder to beat, investors are increasingly looking for diversified sources of return.
For retirees and income-drawing investors, this may be particularly important. Volatility and sequence risk can affect portfolios at precisely the wrong time. Used appropriately, hedge funds may provide diversification and help reduce reliance on one direction of market movement.
The message, Witbooi says, is not that hedge funds are suitable for everyone, or that all hedge funds are the same. They need to be considered within a proper financial planning and portfolio construction context.
ABOUT WADE WITBOOI: BRINGING CLARITY TO COMPLEX INVESTMENT DECISIONS
As Managing Director, Wade Witbooi leads the strategic direction of Amplify, fostering relationships with investment managers, partners and clients while guiding the continued growth of the business. With a background in investment management and portfolio construction, he combines investment insight with long-term thinking to help shape Amplify’s vision and approach. Qualifications: B.Com, PGDIP Financial Planning, CIPM®, CAIA®
The changing role of hedge funds
Investors are navigating a world in which uncertainty has become part of the landscape rather than an occasional disruption. Inflation, interest rate shifts, geopolitical tension, volatile commodity prices, technology-driven market cycles and rapidly changing news flow continue to test traditional assumptions about portfolio construction.
Against this backdrop, alternative investment strategies are attracting renewed attention. Hedge funds, in particular, are increasingly being considered not as fringe or speculative investments, but as specialist strategies that may help investors manage risk, diversify return sources and respond more flexibly to changing market conditions.
IT’S NOT ONE SIZE FITS ALL
The South African hedge fund industry has also changed significantly over the past decade. Greater regulation, improved transparency and broader access have helped move these strategies closer to the mainstream investment conversation. At the same time, investors and advisers still need to understand that hedge funds are not all the same. Different strategies can play very different roles within a portfolio.
In this feature, Amplify Investment Partners’ Wade Witbooi discusses the broader evolution of hedge funds as portfolio construction tools, while Fairtree’s Kamini Naidoo considers the role of multi-strategy hedge funds in helping investors navigate complexity, volatility and uncertainty.