Varma Mutual Pension Insurance Co. may shrink its exposure to credit long/short strategies later this year or in the first half of 2019, according to Kai Rimpi, its director of hedge funds. The company has already cut investment in the strategies over the last two years to 5 percent of its portfolio, from 15 percent.
“Corporate credit long/short hedge funds are one area where it’s just very difficult to generate the risk-adjusted returns we’re looking for,” Rimpi said in an interview. “It’s performed extremely well for years but now that spreads are tight, it will make producing similar returns difficult.”
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