The prevailing economic environment in the world has opened the door to new investment options, one of them being hedge funds. The nature in which they operate is a godsend to many who wish to secure an investment haven that has no limitations. Fortunately, this model has found its way here in Africa and even in Kenya with the Kenyan market seeing a proliferation of hedge funds although in a slow pace.
What are hedge funds?
A hedge fund is an investment partnership. It incorporates the fund manager and several investment partners. The money manager has the jurisdiction of the fund that is pooled by the respective investment partners as per the laid out strategy or goal. This model of combined resources can either be a limited partnership or a limited liability company.
The primary motivation and intent of hedge funds are to maximize returns on the investment and eliminate risk. Mutual funds and venture capital can be confused with hedge funds, but their investment approaches differ. Hedge funds are ideally very aggressive and will venture into risky investments compared to Mutual Funds. Like the name, “hedge fund” suggests the goal of the investment medium is to make money irrespective of the general economic tidings.
The various type of investment hedge funds put their money on are, private equity, initial public offering, bonds, real estate and absolutely anything that they can milk penny on. The fund managers can be compensated depending on the laid down agreements or using a standard. “2 and 20”, which means one takes 2% of net assets and also amass another 20% of profits above a determined return value.
These are universal principles that characterize hedge funds:
1. All investment partners must meet a certain net worth threshold for one to qualify to put his money in a hedge fund. The value varies with each county and the policies of the hedge fund.
2. They have a broad investment base. Any kind of investment is favorable for hedge fund investment.
3. There is no limit or restrictions whatsoever. They leverage on borrowing to meet investment strategies although this being a risky financing strategy.
3. The fund manager and the investment partners play under a standard known as “two twenty”. This means that a 2% fund management fee and another 20% charge on returns generated.
Venture capital vs. hedge funds
Though most people confuse hedge funds as venture capitals, here’s a contrast to the two: Hedge funds will target to put their money in any conceivable investment vehicle, while venture capital makes a killing from startup equity and debt financing the hedge fund goals and investment strategies strictly come under a professional group of staff.
Venture capital funds manage funds on behalf investors wishing to allocate resources to start-ups equity. Venture capital mostly put money in small companies with prospects or promises for growth.
These are hedge funds to look out for in Kenya
Escrow Research and Analytics Kenya Ltd
It is a research and analysis firm that provides has stakes in money market and equity market. It offers analytical information about stock market statistics, performance money markets performance, and trends in macroeconomics.
Amana Capital is a fund manager licensed and regulated by the CMA since 2003. They offer financial assistance to pensions and investments platforms on behalf of institutions. They also provide Unit trusts products targeted at investors with a large number of resources.
A 2009 Norwegian Investment Fund for Developing Countries (Norfund). The firm targets industries that have consistently posted profits in Agriculture, healthcare, and energy. The offer their services to firms that can whose funding starts from $1 million (sh.103 million).They target to exit in 3 to 6 years.
Savannah Fund is a seed capital fund specializing in US$25,000-US$500,000 investments in early stage high growth technology (web and mobile) startups in sub-Saharan Africa.
It is a venture catalyst firm assisting the next generation of exceptional entrepreneurs who are designing and executing innovative business models to serve East Africa’s aspiring mass market profitably.
Horizon Africa Capital
Its headquarters are in Nairobi, Kenya. Its primary activities are M&A advisory, capital raising and corporate financial brokerage in Sub-Saharan Africa.
Capital ventures Kenya ltd
Capital Ventures Limited is located at Nairobi GPO building.
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