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November 30, 2005
Pension schemes take hedge funds into mainstream
Hedge fund investment is moving rapidly into the mainstream with one in five larger occupational pension funds in Britain now partly invested in the asset class, The Times has learnt.
An unpublished survey of 420 pension funds conducted by the National Association of Pension Funds has found that 20 per cent now have at least some hedge fund exposure.
Only two or three years ago, hedge fund investment was regarded as the most exotic of asset classes, pursued by only a tiny proportion of British pension funds. Chris Hitchen, chairman of the association’s investment council, said hedge fund investment by pension funds was now more readily accepted: “It’s got there in the United States; it’s getting there in the UK.”
The survey also found that while a significant minority of pension funds were expanding their hedge fund investments, none were cutting back.
The aggressive shift into hedge funds means scores of employers and millions of pension fund members are for the first time reliant on the asset class.
Mr Hitchen, who also runs the £15 billion Railways Pension Scheme, said the trend was because pension fund trustees were looking for diversification coupled with performance. It was also being encouraged by the flight of many of the most talented money managers to hedge funds, he said.
“There’s been such a flight of talent from the long-only market [traditional equity investing] to the hedge fund space that if you choose not to play there at all, you’ll tend not to outperform your benchmarks.”
Late last year Mr Hitchen’s scheme placed £600 million, 4 per cent of the total fund, with three US-based fund- of-fund managers, which put the money into more than 80 individual hedge funds. “So far it’s doing what we asked it to. We’ll keep it under review.”
RailPen’s target for hedge fund returns is a relatively undemanding Libor plus 4 per cent. The fund has about 350,000 members.
-Times Online-
Posted by su at November 30, 2005 11:36 AM