UK - The UK's biggest pension schemes are shifting assets to hedge funds - and consultants believe smaller schemes are likely to follow suit.
The £26.5bn BT Pension Scheme and the £18bn Electricity Supply Pension Scheme have both made initial hedge fund investments. And the £15.6bn Royal Mail Pension Plan is considering a similar move.
Mercer Investment Consulting senior investment consultant Robert Howie said that this definite move from some of Britain’s largest pension funds is likely to trigger a shift from schemes disillusioned with equities.
He said the actions of the UK’s largest pension funds would give a “sense of comfort” to other schemes looking at the asset class.
NAPF investment director David Gould agreed: “We’ve been trying to demystify the less understood investment areas, so if the major schemes are taking up hedge funds, it will encourage other schemes to do so, too.”
Electricity Supply Pension Scheme chief executive Richard Barlow explained that two of the scheme’s 26 separate plans are using hedge funds, although it was too early to judge their performance.
The Royal Mail Pension Plan’s senior investment officer, Malcolm Macdonald, said he was pitching hedge fund investment to the trustees as part of the scheme’s investment review.
The decision will follow an actuarial valuation by Watson Wyatt, which is due by the end of the month.
In May last year, it was revealed that the £15bn Universities Superannuation Scheme was also considering the use of hedge funds as part of its review of assets.
USS chief investment officer Peter Moon said that a decision will be made within a year.
He added that it would be most likely to adopt a hedge fund with a market neutral absolute return strategy such as a long/short equity approach.
Of the UK’s five biggest funds only the £22bn Coal Industry Pension Schemes has decided against hedge fund investments.
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