Nobel Prize looks to get boost from hedge funds

121012 nobel
Wondering: What would Alfred Nobel think?

The Nobel Foundation, which this year lopped 20% off its cash prizes, is planning to invest more money through hedge funds to boost its returns and restore the award to its previous size.

“When we look at the analysis, we see that we can get more return with less risks by doing that,” Executive Director Lars Heikensten said in an interview. “If we can choose hedge funds that we trust, then we can get better returns for given risks.”

The Nobel foundation, created in 1900 at the request of Swedish industrialist Alfred Nobel to award prizes in physics, chemistry, medicine, peace and literature, this year cut the cash amount of its prize for the first time since 1949. The move followed a decade of poor returns, exacerbated by the onset of the global financial crisis.

The foundation had 2.97 billion kronor ($448 million) in investments at the end of 2011, an 18% slump from its 2007 level, according to its website. The decline prompted a cut in this year's prize amount to 8 million kronor, from 10 million kronor, to safeguard Nobel's capital.

The fund has returned 1.5% to 2%, on average annually, over the past 10 years, below the 3.5% to 4% needed to keep its capital stable, according to Mr. Heikensten.

This article originally appeared in the December 10, 2012 print issue as, "Nobel Prize looks to get boost from hedge funds".