In a world of uncertainty and market noise, hedge funds have an important role to play in investment solutions, providing protection against permanent capital loss in times of upheaval, notes George Herman, CIO of the newly created CAM Asset Management.
CAM Asset Management is a new asset management brand within the Citadel Group, built specifically for independent financial advisors and their clients.
“We have been integrating alternatives into our solutions for 25 years,” says Herman. “Since 2022, bonds have started losing their diversification benefits relative to other growth assets. Global fixed income has been trading risk-on, risk-off, with a positive correlation to other asset classes. Investors must find shock absorbers and the best way to do that is via hedge funds.”
“We never recommend long-term portfolios that don’t include hedge funds, excluding them only if specifically requested to do so. Investors need to avoid long-term permanent capital withdrawal during sharp drawdowns. They need to stay invested for the long term.”
Launched in late July, CAM Asset Management brings together more than three decades of investment expertise, disciplined portfolio construction, institutional rigour and boutique-level care. The business aims to support advisors with the investment confidence, clarity and consistency they need to strengthen client relationships in an increasingly complex environment.
“CAM Asset Management currently manage R115 billion via one channel. At CAM Asset Management, we will be offering discretionary portfolio management services to other IFAs under a new brand,” says Herman. “We’re extending our proven asset management services to a wider audience.”
CAM Asset Management will continue to provide solutions to Citadel, and Herman remains director of the group holding company.
“Our aim is to strengthen the ability of advisers to understand markets,” says Herman. “We provide an independent offering that sits between advisers and asset management – our team has better information on the markets, we have monthly interactions with fund managers, and we have the benefit of the whole CAM machine behind us – from administration to ManCo services.”
“Scalability and costs are a tough issue for a good portion of IFAs. By opening up our asset management engine and expertise to a wider pool of advisers, we meet an important need.”
Herman has been with Citadel for 16 years, joining in 2010 after spending six years at the Eskom Pension Fund where he was chief dealer and investment manager, handling asset allocation, manager selection, tactical overlays and index tracking.
He heads an experienced investment team of six portfolio managers, within a team of 25 people, who have worked together for 13 years. Current assets are managed entirely for private clients.
“Our offering sits between big institutional players on the one hand and stockbrokers on the other. These are institutional-quality investment processes and solutions specifically designed for private clients. We see our job at CAM Asset Management to inform advisers, so that they can manage the client relationships,” says Herman. “We are building long-term relationships with advisers, giving them the tools they need to provide effective investment advice. The focus moves from advisory to the asset management team, with proven outcomes for clients.”
“In our strategy meetings, we analyse the global macro outlook, we look at asset class valuations and market dynamics to create a picture of risks and opportunities. IFAs will now get insight into that process, the debate is open and recorded,” he says. “Our multi-asset funds are designed to achieve specific objectives.”
Around two-thirds of CAM Asset Management’s assets are managed internally, with one-third managed by external partners, via segregated accounts to retain control of assets.
“If we can do it ourselves and at cheaper rates, then we do,” says Herman. “Our in-fund capabilities also mean we are quicker at including hedging instruments like derivatives and forex. Our research team has specialist skills which creates advantages.”
The team uses hedge funds, both local and global, and commodities (actively managed in the futures markets) as portfolio diversifiers. Among other alternatives, they like the long-term nature of infrastructure but struggle to find the right vehicle for private debt.
On his outlook for the markets, Herman notes that the world is going through a unique period, with many industry players believing we are in the late stages of a growth phase.
“The world has reaccelerated with AI and tech. It feels like a brand new cycle rather than a late-stage bull market,” he says. “We think the current pullback is very healthy and we don’t think we are in bubble territory.”
Globally, he notes that many technology stocks have retraced despite posting significant earnings, creating a constructive outlook, although he is less positive on bonds.
In South Africa, a lack of structural growth remains a significant impediment. While energy availability and rail usage have improved, they remain much lower than five to 10 years ago.
“South Africa is hamstrung right now; there is a better growth environment in other places. Having a home bias can be problematic for investors. The JSE has benefited from a commodity-based boom, but that main base has been eroded while we are giving away key sectors, such as autos, to foreign players. Yes, the market can have strong cycles but we are not bullish on South Africa. There are other emerging markets to play in.”
Around two-thirds of the CAM Asset Management portfolios currently comprise offshore assets, managed from its Guernsey office, with the remainder invested in South Africa.
“We want investors to avoid multi-generational risks to their capital, our range of
local and global solutions is designed with that in mind,” concludes Herman. “Over 30 years, our business unit has delivered global multi-asset wealth management solutions for private clients, and we are excited to extend our skillset to a broader audience.”
published by HedgeNews Africa