Investing in absolute return funds in South Africa may eventually segue into hedge funds, predicts Dylan Evans of STANLIB. Evans told MoneyWeb that traditionally retirement funds in his country are nervous about investing in hedge funds, but they do put money into the less volatile, less risky and fast-growing absolute returns funds. But, as Evans says, absolutes may pave the way for hedge funds, if South Africa’s Financial Services Board follows the example of U.K. regulator Financial Services Authority and stops demonizing hedge funds.

“It’s a fair assumption most of us at present associate hedge funds with high risk,” Evans says. “But should the FSB give the green light, the likelihood is we will fall over ourselves to include hedge funds in our retirement funds.” Evans made his prediction by comparing the developments in the industry in continental Europe and the U.K., where absolute returns offerings have been growing at a healthy 40% a year. Yet in the U.K, absolute returns funds may employ hedge-like strategies, while in South Africa, there are “legal constraints” that make hedging strategies “problematic.” That, says Evans, limits absolutes to “tactical asset allocation or strategic asset allocation strategies.” Evans expects that once the FSB changes its views, funds will rechannel funds to hedge funds.