The Financial Sector Conduct Authority (FSCA) previously published draft conditions with which retirement funds should comply in order to invest in hedge funds. The draft conditions included that:

•  A fund may only invest in a hedge fund if the hedge fund is administered by a registered manager in terms of paragraph 2(2) of Board Notice 52 of 2015; 
• fund must ensure that when it invests in a hedge fund, the hedge fund manager contractually undertakes to disclose to the fund if the fund’s exposure to embedded derivatives in the hedge fund exceeds one hundred percent of such derivatives; and 
• where the board of a fund lacks the expertise to make investment choices, such board must, before it invests in a hedge fund, obtain expert advice as required in terms of section 7D(1)(e) of the Pension Funds Act, 1956 to enable it to make the most suitable investment decisions for its fund in relation to investing in a hedge fund. 

Following comments and consultations with the retirement fund industry, the FSCA is of the view that these issues are sufficiently addressed by Regulation 28 of the Pension Funds Act, as well as the proposed amendments thereto.

The draft Conduct Standard containing the proposed conditions is, therefore, withdrawn.  

To read FSCA Communication 51 of 2020 (RF) – Publication of Draft Conduct Standard [-] of 2020 – Conduct Standard prescribing conditions for investments in Hedge Funds, click here.  

To read the FSCA Communication 20 of 2021 (RF) (withdrawing the Draft Conduct Standard) click here.