UK - Schemes investing in alternative assets must ensure they are well diversified if they want to reduce risk.
Hedge fund and private equity specialists claimed the best alternative funds were often difficult for investors because they needed constant monitoring to gain the best results.
Morgan Stanley Alternative Investment Partners said: “If you are going to build a private equity portfolio then you have to be well diversified.
“You will need between 30 and 35 funds in the portfolio.”
However, with alternatives such as hedge funds, pension schemes can gain even more protection by guaranteeing their assets through a bank. This can be provided in a single fund called a structured product.
HFR Europe managing director John Godden explained: “A lot of people are buying into structured products for the comfort factor of capital protection.”
Godden said hedge funds were “a very significant way for pension funds to diversify” – provided they were managed properly.
He explained: “Hedge fund investing is not like investing on a different planet, but just doing something else with assets on this planet.”
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