Magda Wierzycka shuts Sygnia hedge funds, slams managers for investment ‘ruse’

EDINBURGH — Magda Wierzycka, South Africa’s most successful woman entrepreneur in the financial services sector, has shut down her Sygnia hedge fund products, slamming this type of investment beast as a money-making racket. Wierzycka says she has completely changed her mind about hedge funds, which offer investors the opportunity to generate returns even when markets are heading down. Wierzycka is an actuary who has applied forensic precision to the business activities of some of her competitors, causing controversy by picking out Allan Gray for questionable decision-making. Her latest decision may leave her wide open to criticism, with questions about why it took her team so long to figure out that hedge funds don’t deliver the goods – when there has been a wealth of evidence in the public domain for some time highlighting this stark reality about these investment vehicles everywhere in the world. – Jackie Cameron

By Vernon Wessels

(Bloomberg) – South African money manager Sygnia Ltd. closed all its hedge-fund products, ending a 13-year history with an investment strategy its chief executive officer now calls a ruse to pocket fees.

Sygnia CEO Magda Wierzycka

“Once you know that the emperor has no clothes you cannot in good conscience support what has become a management-fee racket,” Chief Executive Officer Magda Wierzycka wrote in an opinion piece in Johannesburg-based daily newspaper, Business Day.

While investors ignored the fees managers were charging during bull markets, this has changed with the onset of regulations that forced hedge funds to convert into mutual funds and adopt more transparent fee structures, Wierzycka argued. The end of quantitative easing and cheap money flowing into emerging markets has also brought a period of outflows and negative, volatile market returns, she said.

“This should be the ideal time for hedge funds to show they can finally deliver on the promise of preserving capital,” the CEO said. “The sad truth seems to be that they cannot.”

The Cape Town-based money manager, which has R181 billion ($12.6 billion) in assets, has now fired all its hedge fund managers and “hopefully closed a chapter on this form of investing,” she said, without saying how many staff or funds were affected, or commenting on the actual returns made by Sygnia’s hedge funds.

“After long advocating the use of hedge funds as a way of managing the downside risk of an investment strategy, I have swung 180 degrees in the other direction,” Wierzycka said.