US - T. Rowe Price will likely continue to set itself against the current trend with regard to hedge funds by deciding against launching such a venture on the grounds it would create a conflict of interest between the money the firm manages on a long term basis and a hedge fund's shorting strategy.
Christian Elsmark, head of investment services (EMEA) at T. Rowe Price, said: “Every few years the hedge fund launch decision comes up before the board and it’s coming up again in the next couple of months.”
He said that the companies T. Rowe Price invests in - and is therefore a supporter of - on a long term basis might be less inclined to meet its managers if information obtained at those meetings ran the risk of being passed on to hedge fund managers.
Elsmark said: “We could run a hedge fund as a separate division, but then you have to ask yourself why you are doing it in the first place. Do we do it just because other people are doing it? Some have moved into hedge funds well and some badly. Lazards did it to cuff long-only equity talent. That’s a defensive move. And also, T. Rowe Price is not in this business for the fast buck.”
In 2003, T. Rowe Price continued to strengthen its presence in Europe with assets under management reaching $4.4bn. Total assets are up to a record $190bn. Last year the firm opened an office in Amsterdam, and is currently seeking an institutional sales person to head up an office in Sweden.
With regard to product development Elsmark said the firm was concentrating efforts on enhanced indexation. He said: “I strongly believe that pension funds in Europe are going to spend more time thinking this year whether they are allocating risk efficiently.
In the UK, current strategies concentrate risk in equities, but we will probably see pension funds incorporating new strategies, primarily moving
a) from government bonds to corporate bonds and emerging market debt; b) from passive equities to enhanced indexation or structured equities; and c) from active equities to alternatives.”
Dismissive of the risk-free reputation index-tracking enjoys, he said: “In 2002, 300 names dropped out of the S&P500 - so it is not so passive to track.”
The current appetite for enhanced index products has been illustrated elsewhere by the growth of Goldman Sachs Asset Management’s Luxembourg-based US CORESM Equity Portfolio where assets under management have now broken the $1bn barrier.
State Street Global Advisors has been selected by Denmark’s Pensionskassernes Administration (PKA) to run a $100m enhanced screened US equity mandate, and by the Reckitt Benckiser UK Pension Fund to manage a £50m UK enhanced indexing equity mandate.
Partner Insight: In recent years, pensions administrators have seen scheme member engagement increase significantly. The advent of pension freedoms in 2015 and the increased choices faced by members have led to a sea-change in the levels and types of...
The Pension Protection Fund (PPF) and The Pensions Regulator (TPR) are probing the sale of Johnston Press as concerns are raised over the impact on the publishing house's pension fund.
The Co-operative Group's pension scheme, Pace, will invest up to £50m into the social and affordable housing market over the next 12 months.