16/11/2011 Author: Kirstie Brewer

Pensions’ hedge fund appetite set to grow

Appetite for hedge funds among UK pension schemes should be set to increase, though transparency and liquidity continue to be stumbling blocks, Martin Mannion, the newly elected chairman of the Investment Council of the National Association of Pension Funds (NAPF), told HFMWeek.

“Hedge funds are a good way of accessing manager skill and diversification and appear to have a good track record”, said Mannion, who is also the director of Finance and Risk for the £8.6bn ($13.7bn) GlaxoSmithKline (GSK) UK Pension Schemes, and secretary to the Trustee for the GSK Common Investment Fund.

“There should be an increasing appetite as schemes either want or need to keep their return-seeking asset exposures to get returns but want to avoid the extreme volatility that mainstream markets have”, he continued, adding that reservations over transparency could be addressed through higher levels of reporting and compliance within the industry.  

“There will also be an issue for some trustees where the entities are offshore and in less well-regulated environments, giving rise to additional risk with less regulatory protection,” he continued.

Hedge funds are a regular topic for The Investment Council, which is one of the main bodies through which the NAPF develops policies on behalf of its members, and, according to Mannion, “there is an ongoing debate”.

In March this year, the NAPF released a ‘made simple’ guide to help pension funds understand hedge funds and how they could use them as part of their investment strategy.