AMWatch

One of Sweden's largest pension funds won't touch hedge funds

Alecta's CIO views hedge funds as "expensive black-box investments", but is keen to boost  investments in other alternatives despite valuations have started to look a bit expensive.

Photo: Richard Drew

One of Sweden’s biggest pension funds says there’s no case for using hedge funds given the cost they represent in the current environment.

Alecta, which oversees about EUR 80bn in assets from its headquarters in Stockholm, prefers to do all its investing in-house. Hans Sterte, the chief investment officer of Alecta, calls hedge funds “expensive black-box investments.” They’re “not for
us,” he said.

“Investors haven’t been paid well in the hedge fund asset-class for a long time now,” he said in an interview. “I know there are funds that are doing a great job, but they are usually closed and can’t provide us with sufficient volumes to make a difference to our returns.”

The stance is a familiar one among Nordic pension funds, where chasing returns in an ultra-low interest-rate environment has forced the industry to keep costs as low as possible.

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