UK - Only a handful of pension funds are investing in hedge funds despite strong pressure in the wake of the Myners review to do so.
The National Association of Pension Funds (NAPF) said as far as it is aware hedge funds only represent a “tiny” proportion of pension funds assets.
NAPF spokesman Andy Fleming said: “Our estimate is that only 10 of the larger pension schemes [those with membership in the thousands] have hedge funds. Between them this would represent no more than 5% of their total assets.”
The NAPF’s views about the low take up by pension funds were endorsed by consultants.
Bacon & Woodrow head of global investment consulting Nick Fitzpatrick said he knew of only one pension fund that holds a hedge fund.
And he added: “We are not in a position yet to give strong positive advice on which funds to choose.”
Fitzpatrick also pointed out that B&W very strongly believed that “no trustee should allow an investment activity he does not understand because, you have to justify it to members if it goes wrong and if you cannot justify you have not got a leg to stand on.
Fitzpatrick said another reason for the low take up of hedge funds was that many of the few hedge funds with a proven track record were not open to new subscribers.
PricewaterhouseCoopers partner John Shuttleworth said that he was aware of no schemes that had invested in hedge funds since the Myners review.
Shuttleworth said that the current hedge fund boom had some of the hallmarks of a classic bubble.
And he added: The time between bubbles seems to be how long it takes to forget the last one, plus one day.
Aon Consulting principal in the London investment practice Chris Erwin said that he knew of hardly any pension funds with hedge funds.
He said: “Following the Myners report and together with the weakness of the conventional stock market, there is considerable pressure on trustees to invest in alternative investments.
“What they do is highly complex, yet it is not entirely clear how some of these funds relate to the long term investing which is what pension fund have to do in order amongst other things to keep their tax relief.”
By David Rowley
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