Every bad investment starts with a great story

If you looked at my family’s investment history, you could be forgiven for concluding that investing simply isn’t our thing.

My grandmother lost a substantial portion of her wealth through an investment linked to Lehman Brothers. My father invested in a UK property development that was never built. My brother backed a Swiss cannabis farming venture that promised exceptional returns and delivered nothing.

A bank collapse, a property scam, a cannabis farm – on the surface, they appear to have little in common. But look closer and the pattern becomes clear. Each one arrived wrapped in a great story: a compelling vision of what the future could look like, told with just enough confidence to override caution.

My grandmother believed she was protecting her future. My father thought he was investing in something tangible and enduring. My brother believed he had found an early opportunity in a rapidly growing industry.

In every case, the dream arrived before the scrutiny did.

I say none of this critically. Most investment mistakes don’t begin with greed – they begin with hope.

And losing money hurts differently when it’s attached to a dream, because what disappears isn’t only the capital. It’s the future you’d already started imagining.

The story is the risk

I’ve made the same mistake myself, on a smaller scale – fallen for a good story before checking the facts underneath it.

And the older I get, the more I think successful investing has less to do with finding brilliant opportunities and more to do with avoiding the ones that quietly destroy capital.

The investors who build wealth over decades are rarely the ones chasing the best story of the year.

They’re the ones asking the unglamorous question every time: what could go wrong here, and can I trust the people explaining how those risks will be managed?

That question – not the promise of a great year – is what I now look for in an investment manager. At Peregrine Capital, every idea is independently assessed by two investment analysts and/or portfolio managers, specifically to challenge the story before conviction sets in.

Past decisions, particularly those that didn’t work out, are deliberately revisited so mistakes become part of the process rather than something to forget.

That doesn’t mean good stories are always wrong – it means they need to survive scrutiny before they are allocated capital.

In 2021, our portfolio managers backed Thungela Resources at around R28 a share, when coal was deeply out of favour and the market wanted nothing to do with the story. Eighteen months later, we exited above R300. The story ultimately proved correct, but our conviction was based on the investment case surviving scrutiny – not simply on how compelling the story sounded.

That’s why hedging, short selling and flexible positioning matter to us as tools, not simply as jargon. They allow a manager to respond when the facts no longer support the original investment case – by reducing exposure, hedging specific risks or taking a different view, rather than being forced to remain fully invested.

A portfolio down 50% needs to gain 100% just to get back to even.

Avoiding that hole can matter far more than chasing one spectacular year.

Consistency is the harder, better goal

Here’s the part that took me longest to appreciate: a great year is not the point. It never was.

Markets can make a manager look brilliant occasionally, but lasting wealth is rarely built on occasional brilliance – it’s built through discipline applied consistently, especially when a trend is working against you and everyone else seems to believe the story.

That discipline shows up in the numbers over time rather than in any single year.

Since its inception in July 1998, Peregrine Capital’s Pure Hedge Fund has never experienced a negative calendar year.*

Peregrine Capital’s High Growth Fund delivered an annualised net return of 16.95% over 15 years**.

These outcomes did not come from one great call. They reflect good decisions repeated across very different market cycles.

Retirees don’t need one great year followed by three bad ones. Parents investing for their children don’t need another captivating story. They need confidence that the people managing their capital will keep applying a disciplined, repeatable process – while still adapting as markets and circumstances change.

The accumulation of ordinary moments

I think about this differently now that I have a four-year-old son.

No single bedtime story will determine who he becomes. What shapes him is the accumulation of ordinary ones – the same story read for the hundredth time, the same small values repeated until they take root.

None of it looks like much on any given day. Over a decade, it’s everything.

That’s the same instinct I now look for in the people managing money: not one great win or a captivating prediction, but the discipline to keep making sound decisions, especially when nobody is telling an exciting story about them.

The next time a manager’s pitch leans on a great year or a compelling story, it’s worth asking the question that matters more: not “What’s your best call been?” but “What’s your process for finding out you’re wrong?”

The answer may tell you far more about how they’ll manage your capital than their best year ever could.

Peregrine Capital Proprietary Limited (“Peregrine Capital”), is an authorised Financial Services Provider (FSP 607) under the Financial Advisory and Intermediary Services Act.

DISCLAIMERS:

Fund performance: Returns are quoted net of fees | Fund performance provided as at 31 August 2026| Fee class status: Class: A, distributing. Net asset value figures (NAV to NAV) have been used for the performance calculations, as calculated by the manager at the valuation point defined in the deed, over all reporting periods. The performance is calculated for the portfolio. Individual investor performance may differ, as a result of initial fees, the actual investment date, the date of reinvestment and dividend withholding tax. Performance is based on a lump sum contribution and is shown net of all fund charges and expenses and includes the reinvestment of distributions. Actual annual figures are available to the investor, on request at ask@peregrine.co.za. Investment performance calculations are available for verification upon request by any person. A schedule of fees, charges and maximum commission is also available on request from the manager. The rate of return is calculated on a total return basis, and the following elements may involve a reduction of the investor’s capital: interest rates, economic outlook, inflation, deflation, economic and political shocks or changes in economic policy. Annualisation is the conversion of a rate of any length of time into a rate that is reflected on an annual basis. Past performance is not indicative of future performance. The Peregrine Capital High Growth QI Hedge Fund is a medium to high-risk investment. The Peregrine Capital Pure Hedge QI Hedge Fund is a low to medium risk investment. The figures shown reflect the returns of the above named qualified investor hedge funds. The value of participatory interests or the investment may go down as well as up. Collective investment schemes are traded at ruling prices and can engage in borrowing and scrip lending. The manager does not provide any guarantee either with respect to the capital or the return of a portfolio. The manager has a right to close the portfolio to new investors in order to manage it more efficiently in accordance with its mandate. Nothing herein constitutes financial advice, a recommendation, or an offer to buy or sell any security. Please refer to the latest MDD/factsheet for further information.

Name
Inception date
Highest annual return
Lowest annual return
Latest 1 year
Latest 5 years
Latest 15 years

High Growth Fund**
Feb-00
71.61%
-16.20%
9.60%
13.77%
16.95%

ASISA South Africa MA High Equity
Feb-00
39.47%
-14.75%
11.71%
10.89%
9.61%

Pure Hedge Fund*
Jul-1998
133.81%
0.59%
6.76%
11.35%
12.24%

ASISA South Africa MA Low Equity
Jul-1998
40.59%
-3.10%
10.53%
9.69%
8.55%

The calculation of all net returns from 1 February 2000 until 30 November 2016 relates to the Peregrine Capital High Growth Fund, prior to its inclusion under CISCA. Thereafter, the data relates to the Peregrine Capital High Growth QI Hedge Fund (“High Growth Fund”). The calculation of all net returns from 1 July 1998 until 30 November 2016 relates to the Peregrine Capital Pure Hedge Fund, prior to its inclusion under CISCA. Thereafter, the data relates to the Peregrine Capital Pure Hedge QI Hedge Fund* (“Pure Hedge Fund”).

For more information visit www.peregrine.co.za

Nicole Funk, investment specialist at Peregrine Capital.

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