Johannesburg-based Laurium Capital has reached the five-year mark with the dollar-based long/short fund that it advises, which combines exposure to South Africa and the broader Africa continent, and has launched a new product with increased African exposure in response to client demand.
The Chobe Sub-Saharan Long Short Fund (recently renamed from SA Alpha Laurium Capital Offshore Portfolio) completed five years at the end of November, delivering a net compound 16% per annum.
The fund can invest up to 25% into Africa, with the rest of the portfolio mirroring the team’s rand-based hedge fund, the Laurium Long Short Fund.
Laurium launched its latest advised fund, the Okavango African Long Short Fund, on October 1 with $20 million from one external investor as well as internal capital.
The fund has gained a net 8% in US dollars for its first three months to the end of December. A hedge fund, it invests up to 30% in South Africa with the rest in broader Africa ex-SA. The fund is long-biased, catering to investor demand for beta exposure to Africa. Hedging is done predominantly via the South African markets, although the team can take advantage of other limited shorting opportunities elsewhere on the continent.
The Zambezi Equity Fund, a long-biased fund advised by Laurium that focuses on Zimbabwe, reached the four-year milestone at the end of November, delivering an annualised 13.9% per annum since inception. It gained 22.7% last year and now has $29 million under management.
Headed by Murray Winckler and Gavin Vorwerg, Laurium now has total assets under management and advice of around R2.6 billion ($240 million), including two rand-based South African long/short funds and South African market neutral fund. Its flagship Laurium Long Short Fund has gained a net 25.39% over 12 months, and an annualised 15.25% since inception in August 2008, while the Laurium Aggressive Long Short Fund has gained a net 54.4% in the 12 months since launch last January.
Laurium’s staff complement of 13 includes three new additions in recent months. Mathew Pouncett, a CA (SA), has joined the team as an analyst to cover banks in Sub Saharan Africa, having previously worked with Deloitte in Johannesburg and San Francisco. Kim Hubner (CFA) focuses on marketing and business development, and was previously at RMB Asset Management, STANLIB Collective Investments and StoneHouse Capital. Richard Lines, CA (SA), works in finance and operations, bringing prior experience at PWC and in product control at Absa Capital.
Looking to the markets in 2014, Winckler says Laurium expects developed markets to do better than emerging markets, and frontier markets to outperform emerging markets. Equities should also continue outperforming bonds.
“However, we expect equity market returns to be more muted relative to last year. South Africa doesn’t rank well in the emerging market space, so we remain long rand hedge counters and short domestic South Africa, in areas such as food producers and retailers, although we have trimmed back our positions this year.”
“A lot of concerns about South Africa’s twin deficits and the shift away from emerging markets have already been discounted and it is possible that the currency may actually strengthen in the second half of the year. In the first half however, we do expect capital flows from emerging markets to developed markets to continue.”
The team uses a fundamental bottom-up research process with a value bias, benefiting from strong financial analysis and extensive experience in financial markets, particularly equities and equity derivatives.
Winckler says notwithstanding the strong equity returns in the past year, Laurium’s hedge fund mandates give it plenty of opportunity to generate good returns from the South African market. African markets have also done very well in the past 12 months – in particular Zimbabwe, Nigeria and Kenya – but the team is finding decent opportunities in the mid-tier space.