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Austrian pension fund APK puts off hedge fund bet

  The Austrian multi-sector pension scheme, APK Pensionskasse, has put on hold plans to more than double its exposure to hedge funds and private equity, its chief executive said on Tuesday.


It had been poised this year to increase its exposure to alternative investments, including hedge funds, to 5% of assets from 2% currently but Christian Boehm told Reuters the APK wants to avoid investments in highly leveraged managers. APK has about €2.5 billion in assets under management and is one of the largest in Austria.

Some hedge fund industry observers have predicted that large, conservative investors such as pension funds would shy away from complex and opaque investments in the wake of the credit crunch, but the evidence has so far been inconclusive.

Speaking on the sidelines of the European Pension Fund Congress here, Boehm said the project has not been completely shelved but the current market environment requires a different approach. “We are looking now for products that could better fit this environment, especially (as) most hedge fund products seem to be highly leveraged. For us it is necessary to know the origin of the cashflow stream of a product.”

APK is still interested in “very simple” hedge fund products with little or no leverage, either in a fund of funds or single fund format. “We are still considering hedge funds but we will look more closely and not at the returns achieved in the past but more at the portfolio construction and how can it react in an environment of low returns,” he said. He said the pension scheme is investing more through exchange-traded funds (ETFs) because of their liquid nature.

An ETF fund tracks an index or asset class and can be bought and sold in the same day. “There are many products that might give good returns, maybe not this year but the next one. Credit is interesting -- there are spreads we have not seen before,” he added. (Reuters)