AP Fonden 7, Stockholm, later this year will invest about 1.6 billion Swedish kronor ($242 million) in the Goldman Sachs Absolute Return Tracker Index portfolio, a hedge fund replication strategy, said Richard Grottheim, executive vice president of the 80 billion kronor fund.
Funding will come from two hedge funds of funds run by K2 Advisors and EIM, both of which were liquidated earlier this year.
We felt that this was a good, alternative way of gaining exposures to hedge funds, Mr. Grottheim said in a telephone interview.
Mr. Grottheim said one advantage of a replication strategy over a hedge fund of funds is management fees. Fees for an average hedge fund cloning strategy are estimated at between 70 to 100 basis points, while a hedge fund of funds strategy usually involves two layers of fees that could triple the cost even before performance fees are considered, he said.