AP7, Stockholm, is considering investing in a hedge fund replication strategy, Richard Grottheim, CIO of the 80 billion Swedish kroner ($13 billion) said at the National Association of Pension Funds investment conference in Edinburgh.
What makes (hedge fund replication strategies) interesting is the possibility that we can get hedge fund beta in a more inexpensive way, Mr. Grottheim said in an interview following his conference presentation. We are seriously looking at it. The problem is that most (replication strategies) are relatively new, so they havent been up and running for very long. Fund officials are in the early stages of considering the strategy, and funding as well as other details have not been determined, he said.
In 2007, AP7 reduced its hedge fund allocation to 2% from 4% because performance was a little disappointing, Mr. Grottheim said.
Separately, in an asset allocation shift to improve its risk/return profile, the fund reduced global equities and hedge fund investments by two percentage points for each strategy. At the same time, commitment to private equity doubled to 8% from 4% of total assets. In the next year, AP7 plans to further raise its private equity investments to 10% from 8%, reducing global equities to 52% from 50%, Mr. Grottheim said.