SWEDEN - Sweden's Sjunde AP-fonden (AP7) has placed SEK2.5bn (e266m) in fund of hedge fund briefs managed by EIM and K2 Advisors on a watch list due to underperformance and in EIM's case, additional concerns over "inaccurate reporting".
AP7 executive vice president Richard Grottheim cited administrative issues, adding: “Some of [the EIM reporting] has been delayed and inaccurate, but if that becomes better, and the return is improved, we will stick with them.”
The briefs, together worth 4% of the portfolio, will be watched closely over the next year. If concerns remain, Grottheim said the fund would seek new managers.
The SEK66bn fund’s foray into hedge funds in 2002 marked the first Swedish public pension fund to invest in the asset class.
EIM was given a target of 8-12% per annum by AP7, while K2’s target was “three times the short US T-bill rate [interest rate]”, Grottheim said.
“The performance has not been fully in line with expectations,” he added.
William Glass, a partner at EIM in charge of business development, said: “Undoubtedly the performance of the mandate was under the standard objective, but AP7 has also said that it understands that in the context of last year.
“We had outperformance in relation to what the industry has achieved, and [AP7] also said they were very satisfied with our performance in the sense of us clearly being ahead of the pack.”
Glass said the administrative issues were not connected to EIM’s administration, but to difficulties the account’s third party custodian had faced in providing data to AP7.
K2 was unavailable for comment.
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