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Welcome to the latest edition of Peregrine Capital’s newsletter, where we share our views and news about our business, our funds, and why hedge funds should form part of a growing and diversified investment portfolio. This edition includes our perspective on Q3 of 2024, following the semi-annual investor letter we published in July 2024.
We share regular updates and insights on our LinkedIn page, so please follow us to stay updated with what we’re working on as we continue to deliver on our purpose of creating wealth for our clients.
Discover the market dynamics impacting our funds’ performance during the third quarter of 2024, as discussed by Justin Cousins, portfolio manager at Peregrine Capital.
The Peregrine Capital High Growth QI and Pure Hedge QI Funds delivered net returns of 8.57% and 5.50%, respectively, for the third quarter of 2024*. This compares with the JSE Capped Swix All Share Index, which gained 8.56%**. It is worth noting that the strong fund performance for the quarter was generated while assuming far less risk than the market as a whole.
Source: *Peregrine Capital and **Bloomberg for the period between 1 July 2024 – 30 September 2024.
Outlook
As global markets have rallied and expected returns have decreased, maintaining a higher exposure to cash feels prudent at this time. While we are not bearish about growth, either at a macro level or for the individual companies in our investment universe, we are less excited about the prospective returns offered by current asset prices. We remain on the lookout for attractive investment opportunities, and the funds are extremely well-positioned to deploy capital should prices fall or compelling new ideas arise.
Portfolio Construction
We reduced exposure to South African bonds and equities this quarter as markets rallied and prices approached our fair value estimates. While we remain bullish about the trajectory of the South African economy under the stewardship of the GNU, we need to see evidence of higher growth rates to improve forward-looking return estimates from current prices. While we have trimmed our SA positions, we retain select exposure to undervalued mid-caps, real estate companies and select high quality names with high growth prospects. The funds were also net sellers of international equities in the quarter. While we still believe Chinese technology shares are undervalued and under-owned, we have trimmed some exposure to these names in light of the recent rally to manage our position sizes.
At the end of the quarter, net exposure to equities and real estate was 63% for high growth and 21% for pure hedge respectively, while net exposure to bonds stood at 14% for high growth and 17% for pure hedge.
Attribution
Returns were fairly broad based in Q3. Exposure to South African bonds and equities was a material contributor following the formation of the GNU. Companies in the real estate, financial services, industrials, and retail sectors drove the majority of the positive performance, while healthcare was the only negative local contributor. Our exposure to Chinese technology shares produced solid returns on the international front after Chinese policymakers announced meaningful stimulus measures. Our select exposure to technology names in the West also contributed to returns this quarter as AI continues to drive demand for products and services of companies we own in that category.
Macro
The extreme anxiety that engulfed local markets in the first half of the year was replaced by relief and excitement in the third quarter. The formation of a credible Government of National Unity drove bond and equity markets materially higher as investors discounted the prospect of higher growth that may arise from the acceleration of market-oriented reforms. Hope springs eternal!
Internationally, the debate has centred on inflation, interest rates and Chinese stimulus in the third quarter. While incoming economic data in the West suggested that inflation has moderated, this has been accompanied by slowing economic momentum. Central banks in Europe and the USA commenced interest rate cuts in the quarter, suggesting we entered an economic easing cycle. After a prolonged period of sluggish growth in China, the government announced a slew of monetary interventions that have driven equity prices meaningfully higher in the most under-owned global equity market.
The extreme anxiety that engulfed local markets in the first half of the year was replaced by relief and excitement in the third quarter.
H4 QI HEDGE FUND
Click above to view the longest-running hedge fund in South Africa, designed to offer investment stability and downside protection while growing investors’ purchasing power. The fund aims to deliver returns above inflation over the medium term and has never had a negative year since its inception in July 1998.**
**Please refer to disclaimers at the end of the newsletter.
H4 QI HEDGE FUND
Click above to view why you should continue to invest in Peregrine Capital’s High Growth Fund - the first hedge fund in South Africa to achieve 100X* an investor’s initial investment, so R1 million invested in the fund in February 2000 is worth more than R100 million now.
*Please refer to disclaimers at the end of the newsletter.
View our Flagship Fund’s Third Quarter 2024 Performance below:
Thinking outside the Hedge Box
Justin Cousins contributed his views to this Financial Mail Investor article. Hedge funds are experiencing a resurgence, with data from asset servicer Citco showing that Q1 2024 was the global sector’s best quarter since the pandemic. Agility and the ability to see the less obvious make hedge funds attractive.
Unveiling the Power of Compounding: Your Path to Wealth Through Hedge Funds
The Rise of Hedge Funds in South Africa - A guide to understanding this asset class
Why Hedge Funds should be part
of your Investment Portfolio
Anne Holding, our Investment Specialist, wrote this article to demonstrate how Peregrine Capital uses the powerful tool of compounding through our hedge funds to help our clients achieve risk-adjusted returns and financial success through the performance of our funds.
In this Fund Hub article, our Investment Specialist, Kavita Patel, explores the Hedge Fund landscape in South Africa, highlighting the highly regulated environment within which hedge fund managers operate to ensure robust protection and attractive investment opportunities, contributing to record growth in 2023.
Price is what you pay, value is what you get
Alan Yates, our Head of Distribution, addresses the issue of fees in this Moneyweb article, explaining why fees aren't the only factor to consider when selecting the right investment vehicle.
Good News for South African Investors
AJ Snyman, our Investment Analyst, spoke to Daily Investor about reasons to be optimistic about South African Equities and the key opportunity presented by undervalued local shares.
Peregrine Capital
in The News
Peregrine’s CEO excited about the benefits AI will bring
Jacques Conradie spoke to BusinessDay's Mudiwa Gavaza about our investment strategy leading up to elections, reviewing the performance of our funds in the first half of 2024, trends in global technology, local versus international investments, and the outlook for the rest of the year.
Peregrine Insider Cape Town Event (August) and Johannesburg (October)
Sanlam Personal Portfolios Investment Summit
Jacques Conradie and our investment team conversed with just under 100 advisors in the mother city and our Sandton office, where the beautiful views were almost as good as the insightful in-person conversations we had with investors.
Our Investment Specialist, Marnus Briedenhann, was recently at the Sanlam Personal Portfolios Investment Summit in Windhoek. Together with other industry experts, they discussed the growing role of hedge funds in retail portfolios, emphasising their flexibility compared to traditional long-only unit trusts.
Investment Think Tank
AJ Snyman presented his talk ‘Smooth Seas Don’t Make Goods Sailors’ at this year’s Investment Think Tank event series. His presentation highlighted the fact that hedge funds have a unique and differentiated ability to not only weather storms but thrive amidst a storm. When a recession hits, volatility rocks the market and a market drawdown comes, hedge funds have the right tools to shield investors from volatility, protect them against the downside and ultimately generate returns regardless of the "weather conditions."
The Investment Think Tank events took place in Mbombela - 15 August, Potchefstroom - 20 August, Bloemfontein - 22 August, Durban - 27 August and Port Elizabeth - 29 August.
Industry events we participated
in that you may have missed
Upcoming events where you can meet the Peregrine Capital team
We look forward to continuing our partnership on your wealth journey and investing in performance in 2025. Secure your financial future by attending our Annual Investor Day event in Johannesburg. Details will be shared with you shortly.
Peregrine Investor Day – February 2025
Our current Spring tournament for financial advisors is underway and ends on 11 November. The summer edition will commence in February 2025. If you would like to join us for an early Thursday morning session in Melrose James at Ethal Gray Park, contact Ayanda at ayandap@peregrine.co.za
Peregrine
Padel
*100X refers to the Peregrine Capital High Growth H4 QI Hedge Fund. R1m invested at inception is worth more than R100m today. The FTSE/JSE Capped SWIX generated R17,6 million while the SA Multi Asset - High Equity Category generated R11,9 million. (High Growth Fund annualised return: 23.20% | SA Multi Asset - High Equity Category annualised return: 10.56% | FTSE/JSE Capped SWIX annualised return: 12.32%, all since inception (February 2000)). Data to 30 September 2024 | Source: Peregrine Capital, Morningstar, Bloomberg
about investing, today.
Our investment philosophy
Click below to watch Peregrine Capital’s investment philosophy, anchored in a fundamental, bottom-up, valuation-focused approach. We continually refine our investment process, although the guiding principles never change. The diligent application of our investment process and industry-leading alignment of interests ensure that we remain true to our mission, which is to create wealth for our clients.
Our investment philosophy
Click below to watch Peregrine Capital’s investment philosophy, anchored in a fundamental, bottom-up, valuation-focused approach. We continually refine our investment process, although the guiding principles never change. The diligent application of our investment process and industry-leading alignment of interests ensure that we remain true to our mission, which is to create wealth for our clients.
Welcome to the latest edition of Peregrine Capital’s newsletter, where we share our views and news about our business, our funds, and why hedge funds should form part of a growing and diversified investment portfolio. This edition includes our perspective on Q3 of 2024, following the semi-annual investor letter we published in July 2024.
We share regular updates and insights on our LinkedIn page, so please follow us to stay updated with what we’re working on as we continue to deliver on our purpose of creating wealth for our clients.
Macro
The extreme anxiety that engulfed local markets in the first half of the year was replaced by relief and excitement in the third quarter. The formation of a credible Government of National Unity drove bond and equity markets materially higher as investors discounted the prospect of higher growth that may arise from the acceleration of market-oriented reforms. Hope springs eternal!
Internationally, the debate has centred on inflation, interest rates and Chinese stimulus in the third quarter. While incoming economic data in the West suggested that inflation has moderated, this has been accompanied by slowing economic momentum. Central banks in Europe and the USA commenced interest rate cuts in the quarter, suggesting we entered an economic easing cycle. After a prolonged period of sluggish growth in China, the government announced a slew of monetary interventions that have driven equity prices meaningfully higher in the most under-owned global equity market.
Locally, market participants are concerned about the potential outcomes of the upcoming national government elections. Equity market volumes have been extremely low, with bias tilted toward the sale of equities and bonds. Valuations of listed equities and bonds are severely depressed despite improvements in energy output and transport seen in recent months. The ANC faces the prospect of losing outright control of the country for the first time in 30 years, and prospective coalition partners offer both high and low road outcomes for South Africa.
Outlook
As global markets have rallied and expected returns have decreased, maintaining a higher exposure to cash feels prudent at this time. While we are not bearish about growth, either at a macro level or for the individual companies in our investment universe, we are less excited about the prospective returns offered by current asset prices. We remain on the lookout for attractive investment opportunities, and the funds are extremely well-positioned to deploy capital should prices fall or compelling new ideas arise.
Discover the market dynamics impacting our funds’ performance during the third quarter of 2024, as discussed by Justin Cousins, portfolio manager at Peregrine Capital.
The extreme anxiety that engulfed local markets in the first half of the year was replaced by relief and excitement in the third quarter.
Portfolio Construction
We reduced exposure to South African bonds and equities this quarter as markets rallied and prices approached our fair value estimates. While we remain bullish about the trajectory of the South African economy under the stewardship of the GNU, we need to see evidence of higher growth rates to improve forward-looking return estimates from current prices. While we have trimmed our SA positions, we retain select exposure to undervalued mid-caps, real estate companies and select high quality names with high growth prospects. The funds were also net sellers of international equities in the quarter. While we still believe Chinese technology shares are undervalued and under-owned, we have trimmed some exposure to these names in light of the recent rally to manage our position sizes.
At the end of the quarter, net exposure to equities and real estate was 63% for high growth and 21% for pure hedge respectively, while net exposure to bonds stood at 14% for high growth and 17% for pure hedge.
Shares in the technology, property, and luxury goods sectors contributed positively to fund performance, while exposure to banks, e-commerce, and retail companies detracted from fund performance this quarter. While our international exposure contributed positively to fund performance, domestic South African equities were particularly weak.
Attribution
The Peregrine Capital High Growth QI and Pure Hedge QI Funds delivered net returns of 8.57% and 5.50%, respectively, for the third quarter of 2024*. This compares with the JSE Capped Swix All Share Index, which gained 8.56%**. It is worth noting that the strong fund performance for the quarter was generated while assuming far less risk than the market as a whole.
Source: *Peregrine Capital and **Bloomberg for the period between 1 July 2024 – 30 September 2024.
View our Flagship Fund’s Third Quarter 2024 Performance below:
H4 QI HEDGE FUND
Click above to view the longest-running hedge fund in South Africa, designed to offer investment stability and downside protection while growing investors’ purchasing power. The fund aims to deliver returns above inflation over the medium term and has never had a negative year since its inception in July 1998.**
**Please refer to disclaimers at the end of the newsletter.
H4 QI HEDGE FUND
Click above to view why you should continue to invest in Peregrine Capital’s High Growth Fund - the first hedge fund in South Africa to achieve 100X* an investor’s initial investment, so R1 million invested in the fund in February 2000 is worth more than R100 million now.
*Please refer to disclaimers at the end of the newsletter.
Thinking outside the Hedge Box
Justin Cousins contributed his views to this Financial Mail Investor article. Hedge funds are experiencing a resurgence, with data from asset servicer Citco showing that Q1 2024 was the global sector’s best quarter since the pandemic. Agility and the ability to see the less obvious make hedge funds attractive.
Unveiling the Power of Compounding: Your Path to Wealth Through Hedge Funds
The Rise of Hedge Funds in South Africa - A guide to understanding this asset class
Why Hedge Funds should be part
of your Investment Portfolio
Anne Holding, our Investment Specialist, wrote this article to demonstrate how Peregrine Capital uses the powerful tool of compounding through our hedge funds to help our clients achieve risk-adjusted returns and financial success through the performance of our funds.
In this Fund Hub article, our Investment Specialist, Kavita Patel, explores the Hedge Fund landscape in South Africa, highlighting the highly regulated environment within which hedge fund managers operate to ensure robust protection and attractive investment opportunities, contributing to record growth in 2023.
Peregrine’s CEO excited about the benefits AI will bring
Good News for South African Investors
Price is what you pay, value is what you get
Jacques Conradie spoke to BusinessDay's Mudiwa Gavaza about our investment strategy leading up to elections, reviewing the performance of our funds in the first half of 2024, trends in global technology, local versus international investments, and the outlook for the rest of the year.
AJ Snyman, our Investment Analyst, spoke to Daily Investor about reasons to be optimistic about South African Equities and the key opportunity presented by undervalued local shares.
Alan Yates, our Head of Distribution, addresses the issue of fees in this Moneyweb article, explaining why fees aren't the only factor to consider when selecting the right investment vehicle.
Peregrine Capital
in The News
Upcoming events where you can meet the Peregrine Capital team
We look forward to continuing our partnership on your wealth journey and investing in performance in 2025. Secure your financial future by attending our Annual Investor Day event in Johannesburg. Details will be shared with you shortly.
Peregrine Investor Day – February 2025
Our current Spring tournament for financial advisors is underway and ends on 11 November. The summer edition will commence in February 2025. If you would like to join us for an early Thursday morning session in Melrose James at Ethal Gray Park, contact Ayanda at ayandap@peregrine.co.za
Peregrine
Padel
about investing, today.
*100X refers to the Peregrine Capital High Growth H4 QI Hedge Fund. R1m invested at inception is worth more than R100m today. The FTSE/JSE Capped SWIX generated R17,6 million while the SA Multi Asset - High Equity Category generated R11,9 million. (High Growth Fund annualised return: 23.20% | SA Multi Asset - High Equity Category annualised return: 10.56% | FTSE/JSE Capped SWIX annualised return: 12.32%, all since inception (February 2000)). Data to 30 September 2024 | Source: Peregrine Capital, Morningstar, Bloomberg
Peregrine Insider Cape Town Event (August) and Johannesburg (October)
Sanlam Personal Portfolios Investment Summit
Jacques Conradie and our investment team conversed with just under 100 advisors in the mother city and our Sandton office, where the beautiful views were almost as good as the insightful in-person conversations we had with investors.
Our Investment Specialist, Marnus Briedenhann, was recently at the Sanlam Personal Portfolios Investment Summit in Windhoek. Together with other industry experts, they discussed the growing role of hedge funds in retail portfolios, emphasising their flexibility compared to traditional long-only unit trusts.
Industry events we participated
in that you may have missed
Investment Think Tank
AJ Snyman presented his talk ‘Smooth Seas Don’t Make Goods Sailors’ at this year’s Investment Think Tank event series. His presentation highlighted the fact that hedge funds have a unique and differentiated ability to not only weather storms but thrive amidst a storm. When a recession hits, volatility rocks the market and a market drawdown comes, hedge funds have the right tools to shield investors from volatility, protect them against the downside and ultimately generate returns regardless of the "weather conditions."
The Investment Think Tank events took place in Mbombela - 15 August, Potchefstroom - 20 August, Bloemfontein - 22 August, Durban - 27 August and Port Elizabeth - 29 August.