SouthernCross Capital, based in Paarl, Western Cape, was founded by Cobus Potgieter and Wilhelm Landman who have spent their entire careers in hedge fund management. The company is 100% owner-managed and has an AUM of R450-million, broken down into R350-million hedge fund and long-only R100-million.
Client profile
Our typical client profile is a split between financial advisors, advisor-driven cat IIs, DFMs and institutional multi-managers.
Meet the team
The team at SouthernCross Capital is made up of four key individuals. The management team consists of the founders, Wilhelm Landman and Cobus Potgieter, both of whom have extensive experience in investment.
The investment team also consists of the two founders alongside Pieter Slabbert, who supports the portfolio managers through investment research, financial modelling and quantitative analysis. He has a BCom Honours in actuarial science from Stellenbosch University where he is pursuing a Master’s.
Emily Wright is the final member of the team. She is a qualified chartered accountant (CA) who graduated from Stellenbosch University. At SouthernCross, she oversees financial strategy and operational efficiency, bringing strong analytical skills and international experience.
Investment philosophy
SouthernCross Capital believes that distortions related to differing mandates, views, indexing and sentiment will consistently cause markets to be inefficient. We also hold that there is excess absolute return to be extracted in providing liquidity to these divergent market participants while always remaining anchored in the fundamental value of the underlying asset. SouthernCross Capital seeks to exploit these opportunities in isolation, controlling for exogenous risks to generate alpha over and above expected returns.
Products and benefits
The inclusion of a SouthernCross hedge fund to a portfolio offers several benefits:
- The hedge funds tend to deliver superior returns for less risk relative to traditional investments.
- SouthernCross hedge funds have a history of delivering positive returns during periods of turmoil, as the equity arbitrage opportunities that the investment team specialise in excel when there is blood in the streets.
- The hedge funds are uncorrelated to the other components of the portfolio, offering the truest diversifier readily available to the end investor.
- Given the low rate of adoption to date, hedge funds are one of few tools available to advisors to enhance their offering relative to their peers that are slower to adapt.
Process to develop and implement investment solutions
We offer funds where we believe we have an edge over the broader market and as such, we offer the low equity SouthernCross NCIS Market Neutral Hedge Fund, medium equity SouthernCross Prescient Multi-Strategy Hedge Fund and SA high equity SouthernCross BCI Equity Fund. Our particular expertise is in equity arbitrage, where we generate returns by exploiting relative differences in equity instruments without assuming market risk.
Process for servicing clients
Because we are boutique and small we are able to grant our limited number of clients extraordinary engagement and are able to work with clients to develop products they require.
Different types of funds offered
- Market Neutral Hedge Fund
- Multi-Strategy Hedge Fund
- SA Equity Fund
The investment team has hedge funds in their blood. Even though SouthernCross offers a traditional equity fund, the hedge funds are the flagship products. The equity fund is managed through the lens of a hedge fund with various market-neutral strategies ported on top of an equity benchmark.
Performance Market Neutral
- 8.96% per annum since inception.
- 11.31% per annum over the past 3 years.
- 8.84% per annum over the past 5 years.
- 86% positive months since inception.
- Low volatility absolute returns, few drawdowns and no negative 12-month period since inception.
Multi-Strategy
- 15.31% per annum since inception.
- 17.75% per annum over the past 3 years.
- Significant outperformance of Capped Swix (15.86%) and ASISA MA High Equity (13.35%) with reduced levels of volatility without experiencing a negative 12-month period since inception.
Contact information:
- Cobus Potgieter
- Telephone: 021 879 1158
- Email: info@southerncrosscapital.co.za
- Website: www.southerncrosscapital.co.za
The algorithmic execution experts
SouthernCross Capital is in the business of delivering steady risk-adjusted returns in all market conditions. Blue Chip asked Wilhelm Landman and Cobus Potgieter to share some insight into the company.
How would you describe your hedge fund management business?
With over R400-million in assets under management and an eight-year track record, SouthernCross Capital manages a market-neutral hedge fund, a multi-strategy hedge fund and an equity long-only unit trust. We focus on delivering consistent, uncorrelated returns. We are owner-managed and the portfolio management team all have most of their personal net worth invested in SouthernCross funds. As investors ourselves, we are therefore motivated to maintain the quality of the funds as our clients are.
What is your competitive advantage?
We specialise in equity arbitrage, particularly corporate structure arbitrage and corporate action arbitrage. To this end we possess a deep understanding of corporate structures, dissecting and analysing the underlying components of company balance sheets, as well as an extensive knowledge of the South African corporate action process.
Corporate structure arbitrage entails any situation where we can gain exposure to a company through multiple listed entry points, creating the opportunity to exploit divergence in value between these entry points in a low-risk fashion. Corporate action arbitrage trades occur through the transactions conducted by listed companies, which often create mispricing and thus the opportunity for exploitation by hedge funds. These include merger arbitrage, rights issues, restructurings, other secondary offerings and convertible bond arbitrage.
In order to exploit these opportunities efficiently, we utilise and are highly experienced in algorithmic execution. We have developed a proprietary electronic order and portfolio management system to assist in the management of complex positions.
The arbitrage opportunities typically provide an attractive return given that they are low risk in nature. They provide the foundation for all our strategies, delivering steady risk-adjusted returns in all market conditions, with the propensity to outperform significantly during periods of market chaos. They are well-suited to being combined with the higher return/risk directional equity and fixed income strategies in our funds.
How do you manage risk in your hedge funds?
We limit risk through diversification and position sizing limits. Corporate structure and corporate action arbitrage positions are managed on a per-position framework based on the likelihood of their return. As these positions have limited downside and high certainty of return, they tend to be large components of the funds.
Relative value positions, that is to say equity, pairs where we are both long and short a share from the same sector, are restricted in size on a per-position basis to limit concentration. Even a highly convicted pair will never exceed 10% of the fund.
Directional exposure, like long short equity, is typically unconcentrated and highly diversified. These position sizes range from 0.5% to 4% of the funds.
What is your track record?
The SouthernCross NCIS Market Neutral Retail Hedge Fund, launched in October 2017, has delivered a net annualised return of 8.7% to date, including 12.1% over one year, 10.6% annualised over three years and 8.7% annualised over five years. This performance was delivered with consistency while protecting against the downside, as the fund boasts 86% positive months since its inception.
The SouthernCross Multi-Strategy Prescient Retail Hedge Fund, launched in August 2020, has achieved a net annualised return of 14.5%, including 21.6% over one year, and 15.5% annualised over three years. The fund thus provided equity returns while still maintaining 67% positive months.
The core arbitrage strategies provide significant repeatability of returns and downside protection to both hedge funds, and when combined with other un-correlated equity and fixed income strategies deliver attractive risk-adjusted returns. These arbitrage opportunities have historically outperformed during times of market turmoil, and therefore our funds tend to outperform significantly during market sell-offs.
| About Wilhelm Landman Wilhelm holds a BCom Honours in Financial Analysis and is a CFA Charterholder. He has a decade of experience in the investment industry, with a particular focus on equity long/short strategies and corporate action arbitrage. Prior to establishing SouthernCross Capital, Wilhelm spent four years as a Portfolio Manager at AIP Capital Management. He began his career at Nitrogen Fund Managers, gaining three years of foundational experience in equity analysis. |
| About Cobus Potgieter
Cobus holds a BCom Honours in Investment Management and is both a CFA and CAIA Charterholder. With over 15 years of investment experience, he brings deep expertise in hedge fund strategy, portfolio construction and risk management. Before co-founding SouthernCross Capital, Cobus served as Chief Investment Officer and Portfolio Manager at AIP Capital Management for four years. He previously spent eight years as a Senior Analyst at Nitrogen Fund Managers, where he honed his skills in equity research and arbitrage strategies. |
