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Capricorn shorts industrials to beat JSE

Market Neutral hedge fund up 6.8% in November.

Capricorn Fund Managers’s November gains for the Market Neutral hedge fund were the strongest since it began almost two years ago by betting that South African mining, industrial and construction stocks would fall.

The fund, started in February 2014, returned 6.8% last month, according to the company. The FTSE/JSE Africa All Share Index fell 4.1%. The portfolio also gained from stakes in Naspers, South Africa’s largest company, and school owner Curro Holdings, money manager Stephen Carew said in an e-mailed reply to questions. He declined to identify the shorts, bets that stocks would drop, because the information is sensitive.

“We’ve been the beneficiary of favouring those businesses that have positioned themselves for growth in a low-growth environment — in many instances these businesses have looked to go offshore, leveraging their strong South African bases,” Carew said. “On the short side, we have looked for the inverse, those businesses that have failed to change and are much more exposed to the weaker economic environment.”

South African mining and industrial companies have suffered from a China-led commodity slump and the country’s economy narrowly avoided a recession in the third quarter. Media and technology company Naspers climbed last month as it reported first-half earnings rose as much as 42%.

Capricorn’s Performer hedge fund gained 6.4% last month and 37% this year through November, according to the Johannesburg-based company. The Market Neutral hedge fund has returned 31% this year. The company manages R7.7 billion ($536 million), it said.

©2015 Bloomberg News

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