Reflecting on the past year and Looking Ahead
Dear Investors,
The past year has been a year of significant growth and achievement for AIP Capital Management. I am proud to share that our business has expanded meaningfully, with our investment strategies delivering strong results and outperforming their respective benchmarks. This success is a testament to the dedication of our team, who has strengthened substantially over the year, and the robustness of our investment philosophy.
Fund Performance Highlights
Two of our flagship funds, the AIP RCIS Equity Long Short QI Hedge Fund and the AIP RCIS Concentrated Growth QI Hedge Fund, completed their first full calendar year in 2024, delivering double-digit returns and solidly outperforming their benchmarks. These results reflect our ability to identify and capitalize on opportunities across markets, even in a complex and volatile environment.
In October 2024, we launched the AIP Global Fund, domiciled in the Cayman Islands. While the fund was officially launched late in the year, the strategy has been in operation since 2023 and has already outperformed its benchmark. We are excited about the value this fund will add to our clients’ portfolios as we continue to execute on this strategy.
Below is a summary of the 2024 performance across our fund offerings:
Source: Morningstar Direct
The returns over the past year also reflect the longer-term track record of our investment strategies. The Long/Short equity strategy averages 22.3% p.a. over the past three years. Whilst the combination of strategies in our Global Fund, average 29.0% p.a. in ZAR over the past 3 years. These exceptional returns are the result of our differentiated investment approach and vast investment experience.
Our Differentiated Approach
At AIP, we pride ourselves on being a niche alternative investment manager. Our goal is to provide clients with differentiated sources of return, whether through unique product offerings or by identifying esoteric markets where we can extract value. In 2024, our trading strategy allowed us to capitalize on several key opportunities:
Corporate Acquisitions/Takeovers: We benefited from corporate actions such as the announced takeover of Barloworld by a consortium led by its current CEO. This event-driven opportunity aligned perfectly with our strategy to capture value from market inefficiencies.
Commodity and Resource Plays: African Rainbow Minerals was a strong contributor, as we took advantage of the rally in gold prices while the stock remained undervalued. Additionally, our participation in a book build for a Canadian company—specializing in critical minerals for the AI revolution—highlighted our ability to identify and act on global trends.
Clean Energy and AI Themes: The clean energy sector, particularly uranium, presented compelling opportunities as major technology firms like Microsoft and Amazon announced plans to use nuclear power for their data centres. This trend, driven by the AI revolution, underscores our focus on thematic investing.
Global Distressed Debt: Our strategy in global distressed debt also delivered strong results. Improvements in Argentina under new leadership and the restructuring of Ukrainian debt following IMF intervention provided attractive opportunities for value creation.
Our Experienced Team
We managed to expand our investment team through the appointment of two more experienced traders. Arthur Buchner has more than 30 years trading experience. He was previously a Director at BOE Securities and Head of Derivatives Trading at Nedbank Capital. Arthur was instrumental in the development of CFDs (trading instruments in the hedge fund space) in South Africa. We also strengthened our fix income trading expertise through the appointment of Mandisa Sibango as fix income trader. Mandisa has 18 years industry experience, inter alia, as fix income trader at Sanlam Investment Management.
Looking Ahead to 2025
As we step into 2025, we anticipate a year marked by volatility and headline risk, particularly with the incoming U.S. presidency of Donald Trump. While uncertainty may dominate the narrative, we are confident in our ability to navigate these challenges and capitalize on the opportunities that arise. Our team remains committed to identifying differentiated sources of return and delivering value for our clients.
We will continue to expand our product range and is on the brink of launching a Long/Short Equity RIFF Fund and a ZAR Global Feeder Fund. Both these funds will make it easier for investors to invest in the existing AIP Capital product offerings.
I would like to extend our gratitude to our clients for their trust and support. Your confidence in our strategies motivates us to continue pushing the boundaries. Thank you for being part of our journey. If you are not a client yet, please feel free to contact us at investing@aip.co.za or 0828811647. We will always make ourselves available to share our exciting business offering with you.
Kind Regards
Johan Henn
CEO
Disclaimer:
Collective Investment Schemes are generally medium- to long-term investments. The value of participatory interests (units) may go down as well as up. Past performance is not necessarily a guide to future performance. Collective investments are traded at ruling prices and can engage in scrip lending and borrowing. A schedule of fees, charges, and maximum commissions, as well as a detailed description of how performance fees are calculated and applied, is available on request.
Lump-sum performance returns are being quoted. Income distributions, prior to deduction of applicable taxes, are included in the performance calculations. NAV to NAV figures have been used for the performance calculations, as calculated by the Manager at the valuation point defined in the deed, over all reporting periods. Investment performance calculations are available for verification upon request by any person. Reinvestment of income is calculated on the actual amount distributed per participatory interest, using the ex-dividend date NAV price of the applicable class of the portfolio, irrespective of the actual reinvestment date. The individual investor performance may differ, as a result of initial fees, the actual investment date, the date of reinvestment and dividend withholding tax. The rate of return is calculated on a total return basis, and the following elements may involve a reduction of the investor’s capital: interest rates, economic outlook, inflation, deflation, economic and political shocks, or changes in economic policy. Annualised returns are period returns re-scaled to a period of one year. This allows investors to compare returns of different assets that they have owned for different lengths of time. All period returns greater than one year have been annualised. Returns for periods less than one year have not been annualised. A cumulative return is the aggregate amount an investment has gained or lost over time, independent of the period involved. Actual annual figures are available to the investor on request.
The Manager does not provide any guarantee in respect to the capital or the return of the portfolio. Excessive withdrawals from the portfolio may place the portfolio under liquidity pressure and in such circumstances, a process of ring-fencing of withdrawal instructions and managed pay-outs over time may be followed. Commission and incentives may be paid, and if so, are included in the overall costs.
The Manager may close the portfolio to new investors in order to manage it in accordance with its mandate. Prices are published daily on our website and local media. Additional information, including key investor information documents, minimum disclosure documents, as well as other information relating to the basis on which the manager undertakes to repurchase participatory interests offered to it, and the basis on which selling and repurchase prices will be calculated, is available, free of charge, on request from the Manager.
The value of an investment is dependent on numerous factors which may include, but not limited to, share price fluctuations, interest and exchange rates and other economic factors. Where the portfolio invests in offshore assets, performance is further affected by uncertainties such as changes in government policy, taxation and other legal or regulatory developments. The Manager ensures fair treatment of investors by not offering preferential fee or liquidity terms to any investor within the same strategy. For hedge funds that include commodity securities, the extent of exposure to physical delivery is not permitted.
Fund Risk
Leverage Risk: The Fund borrows additional funds, trades on margin or performs short sale trades to amplify investment decisions. This means that the volatility of a hedge fund portfolio can be many times that of the underlying investments due to leverage on a fund.
Derivative Risk: Derivative positions are financial instruments that derive their value from an underlying asset. Derivatives are exposed to implicit leverage which could result in magnified gains and/or losses on the portfolio.
Counterparty Credit Risk: Counterparty risk is a type of credit risk and is the risk of default by the counterparty associated with trading derivative contracts. An example of counterparty credit risk is margin or collateral held with a prime broker.
Volatility Risk: Volatility refers to uncertainty and risk related to size of change of an instrument or portfolio. It is a statistical measure of the dispersion of returns for a given security or market index. Volatility is proportional to the directional exposure of a portfolio and is measured by Value at risk (VaR) which is a statistical technique used to measure and quantify the level of volatility.
Concentration and Sector Risk: A large proportion of total assets invested in specific assets, sectors, or regions. Concentrated positions or concentrated sectors in a portfolio will materially impact the returns of the portfolio more so than diversified portfolios.
Correlation Risk: A measure that determines how assets move in relation to each other. Correlation risk arises when the correlation between asset-classes changes. Correlation risk also arises when the correlation within an asset-class changes. Examples of correlation within asset classes include equity pairs trading, fixed income curve trading and commodities pairs trading.
Equity Risk: Applies to investment in shares or derivatives based on shares. The market price of shares varies depending on supply and demand of the shares. Equity risk is the risk of loss due to the drop in the market price of shares. Equity risk can either be systematic risk which is risk to the entire market based on political and economic indicators or unsystematic risk which is company specific and includes risk relating to company profits, prospects and consensus on the company or sector.
Currency/Exchange Rate Risk: Assets of a fund may be denominated in a currency other than the Base Currency of the fund and changes in the exchange rate between the Base Currency and the currency of the asset may lead to a depreciation of the value of the fund’s assets as expressed in the Base Currency.
The Manager is registered and approved by the Financial Sector Conduct Authority (“FSCA”) under CISCA. The Manager retains full legal responsibility for the portfolio. AIP Capital Management (Proprietary) Limited, FSP No. 48828, is authorised under the Financial Advisory and Intermediary Services Act 37 of 2002 to provide investment management services. FirstRand Bank Limited is the appointed trustee.
The information contained in this report is provided in good faith and has been derived from sources believed to be reliable and accurate. However, no representation or warranty, express or implied, is made in relation to the accuracy or completeness of this information.
Qualified Investor
Any person who invests a minimum of R1 million per hedge fund and who has demonstrable knowledge and experience in financial and business matters (ability to assess the merits and risks of a hedge fund); or has appointed a Financial Services Provider (FSP) who has demonstrable knowledge and experience to advise on the merits and risks of a hedge fund.
Comments