Five hundred years after John Cabot laid claim to America for King Henry VII, a member of the current Cabot generation has pioneered the first South African hedge fund.
The fund is run by Albert Alletzhauser, author of the best-selling book "House of Nomura," and his wife Anne Cabot-Alletzhauser, who also is head of investments for fund-of-funds manager Timelife Insurance Ltd., Dunkeld West, South Africa.
While John Cabot actually was seeking a shorter trade route to the Orient, the current generation of Cabots' route to South Africa was equally circuitous. After meeting and marrying in Tokyo, the couple moved to London in 1988. Mr. Alletzhauser became president of TIR Securities, a global brokerage house, and Ms. Cabot-Alletzhauser became head of the quantitative development team at what was then INVESCO MIM Ltd. In 1992, they relocated to South Africa.
Their hedge fund, the open-end Cabot Pathfinder Fund, has racked up a 33% return in the six-month period ended Sept. 30, compared with the Johannesburg Stock Exchange index's 1.6% performance. Taking significant stakes in potential takeover, restructuring, recovery or undervalued stocks, the fund - which is not available to U.S. investors - so far has pulled in $18 million.
The Johannesburg Stock Exchange is one of the least liquid. Mr. Alletzhauser believes that will change shortly, creating new opportunities for investors.
While half of the portfolio is invested in large-cap and midcap stocks, the balance is invested in smaller-cap stocks largely neglected by South Africa brokerage houses. The fund also uses trading strategies, including short selling.
Former broker Mr. Alletzhauser manages the fund; Ms. Cabot-Alletzhauser advises the fund on style issues.