Stockholm (HedgeNordic) Growing prospects of a U.S. boom and lack of confidence in Europe’s political future is causing Ilmarinen, the Finnish pension fund with EUR 36 billion in AUM, to shun hedge funds and move its assets to the U.S., its CEO says.
According to Ilmarinen’s CEO, Timo Ritakaillo, outsourcing investment decisions to hedge funds is considerably less appealing than it once was, following years of ultra-low interest rates.
“It’s more and more important to look at the cost level of different investment instruments,” he said. “Specifically, I mean very expensive asset managers like hedge funds. We only have 2 percent of our total assets in hedge funds,” Ritakaillo told Bloomberg.
“In my view, the hedge fund industry probably will struggle next year again because their current cost structure is too high, from an investor’s point of view, given the low-return environment,” Ritakallio said.
In addition, the pension fund plans to adjust investments so it’s no longer underweight in the U.S. “We’re monitoring the geographic dynamic and are putting more focus on the U.S. market, and moving away from the euro zone,” Mr. Ritakallio said, citing a “very poor outlook for the whole economy, because this 1-1.5% growth rate will continue for a long time” in Europe. “It has a very negative impact.”
By contrast, Ritakallio expects the dollar to continue appreciating next year, as Trump’s policies spell both faster inflation and greater instability in the short term, Ritakallio said.