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Tuesday, 23rd April 2024
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NTMA to kick off pension move to hedge funds Back  
Although the latest influx in capital into the $1 trillion global hedge fund industry has been largely driven by pension funds, Irish pension trustees have been reluctant to allocate to alternatives. However, as KBC prepares to launch one of the first hedge fund products aimed at Irish pension funds, and the €10 billion national pension fund moves into alternatives, it may be just a matter of time before Irish trustees catch up with their international counterparts.
WWith little or no allocation to hedge funds, Irish pension funds are not contributing to the huge growth in capital flowing into the global hedge fund industry yet.

Globally, pension funds have increasingly turned to hedge funds to provide them with higher returns. For example, the $166 billion California Public Employees Retirement System (CalPERS), the United States biggest pension plan in terms of assets, is one of the world’s largest pension investor in hedge funds, with a $1 billion allocation, of which more than half has already been invested.

In Ireland, it looks like the National Pension Reserve Fund (NPRF), which was valued at €10.1 billion at the end of March 2004, may be the first Irish pension fund to give an allocation to hedge funds. Speaking to FINANCE, Ronan O’Connor, head of asset allocation with the NPRF, says that the fund is considering all sorts of alternative investments, and has already given an allocation of 4 per cent to property, and 5 per cent to private equity. He says that hedge funds are next on the agenda, and a decision will be made at the next meeting of the NPRF Commission in September.

Gerry Ryan, head of HR service delivery and pension fund administrator to eircom’s €3 billion pension fund and chairman of the Irish Association of Pension Funds, says that eircom is currently considering investing in hedge funds, but that they are approaching it with a great deal of caution, and are researching the sector very thoroughly.

He says that the biggest difficulty with hedge funds is their complexity, and therefore the large degree of due diligence needed to assess them. If eircom do make an allocation to hedge funds, Ryan says that it will be on a fund of funds basis, and he would expect other Irish pension trustees to do the same.

Recognising this preference for the fund of funds approach, KBC Asset Management is to become one of the first Irish based fund managers to offer hedge fund products to its institutional pension clients, and over the next month will start marketing the KBC Alternative Master Fund, which currently has approximately €36 million invested in it, to its pension and charity clients.

The overall strategy of the fund is market neutral, and it will invest in five different sub-strategies. A fund of hedge funds, KBC has reduced the investible universe for the fund to 50 hedge funds, and at the moment is only using 18 managers. The target on the fund is inflation +3/5 per cent.

Other pension fund managers have yet to develop hedge fund products. AIB Investment Managers, New Ireland, Montgomery Oppenheim and Irish Life Investment Managers, told FINANCE that they do not currently offer hedge fund products to institutional clients, and have no plans of doing so in the foreseeable future.

Hibernian Investment Managers does not market hedge funds to institutional clients, but they do have access to its Templar hedge fund, which is mainly focused at high net worth clients, and it has a minimum investment of €125,000. Kevin O’Kelly, business development manager with Hibernian, says that as Hibernian is owned by Morley Fund Management, it would be possible to sell some hedge fund products run by the company to its clients, and this might be something they will consider in the future.

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