Dutch pension fund Pensioenfonds Zorg en Welzijn eliminated its $5 billion hedge fund portfolio over the past year.
PFZW, Zeist, Netherlands, adopted a new investment policy in 2014 for the $198.3 billion pension fund that eliminated a strategic investment allocation to hedge funds because they did not fully meet new investment criteria, a news release said Friday.
Under the pension fund’s new investment policy, “all investment categories are assessed for their sustainability, complexity, costs and their contribution to PFZW’s objective of index-linking pensions,” the news release said.
PFZW was an early investor in hedge funds among Dutch pension funds, establishing its portfolio in 2003 to add diversification to its overall portfolio.
“For a long time, hedge funds were a useful tool in this regard, but lately, they have not made a sufficient contribution to this objective,” the release said.
Jan Willem van Oostveen, PFZW’s manager-financial and investment policy, said in the release that the new investment regime emphasizes “controllability and intelligibility” and noted that “a complex investment category like hedge funds, which encompasses such diverse strategies, no longer sits well with PFZW.”
The “high cost” of investing in hedge funds “can only be justified if the returns also are high,” Mr. van Oostveen said in the release, and added that “with hedge funds, you’re certain of the high costs, but uncertain about the return.”
The 2.7% allocation dedicated by PFZW to hedge funds in 2013 was “all but eradicated over the last year,” the release said. The strategic allocation to hedge funds was moved into the global equity allocation.
PFZW’s full asset allocation was not available. Ellen Habermehl, a PFZW spokeswoman, did not return an e-mail request for more information and an interview with Mr. van Oostveen.