JSE and Momentum Offer Greater Transparency in Hedge Fund Industry

May 11, 2011


Johannesburg, 9 May 2011 – In a move designed to bring much needed transparency to the unregulated hedge fund industry, the Johannesburg Stock Exchange Ltd (JSE) announced today that it has acquired Momentum’s Managed Account Platform (MAP) after receiving approval for the transaction from the Competition Commission. This risk management tool, which offers hedge fund investors greater protection by segregating investors’ assets from the hedge fund manager, was developed to monitor hedge funds’ trading activity, thereby ensuring that they remain within agreed investment mandates.
Allan Thomson, Head of Derivatives Trading at the JSE, said the acquisition makes the JSE the first exchange worldwide to endorse a managed account platform which would provide more transparency to hedge fund trading.

“We are delighted to have concluded this acquisition. The JSE has been working with MAP for some time now. We believe that this deal will be beneficial for the markets as it provides a safe platform for the hedge fund industry to grow,” he says.

Rand Merchant Bank and Momentum developed MAP in 2007 as a way to create a more robust framework for institutional participation in the South African hedge fund industry. “The market has been regarded as opaque, both locally and globally,” says Braam Jordaan, responsible for Momentum Alternative Investments.

The gradual shift towards increased institutional investment into the hedge fund industry over the past few years resulted in the need for a broader application of the technology. Says Jordaan: “It became clear early on that this concept had greater industry-wide benefit and it needed to be driven by an independent industry-wide player. The JSE, with its unique position in the South African financial markets landscape, is ideally placed to fully realise the potential of MAP.”

With the recent changes to Regulation 28 of the Pension Funds Act coming into effect on 1 July 2011, this framework is particularly useful. The change was the latest in a series of regulatory changes making hedge funds a more attractive option for institutional investors who are now able to invest up to 10% of their assets in hedge funds, up from the 2.5% allocation previously reserved for “other” investments, including private equity.

"This is an exciting development for the South African hedge fund industry. Momentum is proud to be associated with the development of this technology which has introduced a risk management framework more akin to that which institutional investors would find acceptable. We believe that through this transaction, the JSE will play a pivotal role in the development of the hedge fund industry. To this end, the exchange can be assured of our continued support," says Jordaan.

Thomson says that hedge funds play, and will continue to play an important role in the South African financial markets. “MAP is a significant move forward towards giving investors greater confidence that hedge funds are operating within their mandates,” he says.
The hedge fund industry in South Africa, like the rest of the world, is currently unregulated and has been fraught with reputational problems. Thomson believes that while it may require a paradigm shift for the industry, a tool such as MAP managed by an entity such as the JSE (which is independent of any of the funds) would be welcomed by the industry.
“The JSE is confident that this venture will advance the supervision and credibility of the hedge fund industry and assist the already sound reputation of the South African financial markets,” concludes Thomson.

ENDS

Issued on behalf of the Johannesburg Stock Exchange and The Momentum Group

For further comment from the JSE, please contact Victoria Williams / Renata Da Silva (CorpCom)
+27 11 4832198 on behalf of
Allan Thomson
Head: Derivatives Trading
JSE Ltd

For further comment from The Momentum Group, please contact Zaida Essop, Head of Marketing, Momentum Investments ,+27 21 940 5778 / 082 82 32 258 on behalf of

Braam Jordaan
Chief Executive Officer
Momentum Alternative Investments

About the JSE Limited
As South Africa’s only full service securities exchange, the Johannesburg Stock Exchange (JSE) connects buyers and sellers in four different financial markets, namely equities, financial derivatives, commodity derivatives and interest rate instruments. The JSE offers the investor a truly first world trading environment, with world class technology, surveillance and settlement in an emerging market context. It is amongst the top 20 largest equities exchanges in the world in terms of market capitalisation. For further information, please visit www.jse.co.za

About the Momentum Group
The Momentum Group is a subsidiary of MMI Holdings, born from the merger of Momentum and Metropolitan, the core businesses of which is long-term insurance, asset management, investment, healthcare administration and employee benefits. The Momentum Group offers various financial products, services and solutions aimed at protecting one’s wealth, health and wellness in such a way that the risks to an investor’s continued success in life are reduced. For further information, please visit www.momentum.co.za