- Advertisement -
- Advertisement -

AP3 Cutting Exposure to Hedge Funds

Report: Systematic Strategies

- Advertisement -

Stockholm (HedgeNordic) – The third Swedish national pension fund, AP3, has been trimming the overall exposure to hedge funds due to a combination of high fees and low returns. Marten Lindeborg (pictured), chief investment officer at AP3, told Bloomberg that the third buffer fund in the Swedish national pension system has “recently reduced the exposure” to hedge funds after investing in these vehicles for a long time.

Comparing the Stockholm-based fund’s latest annual financial reports, one can notice the overall portfolio exposure to absolute return strategies and hedge funds decreased to 2.1 percent at the end of 2017 from 3.9 percent at the end of the prior year. More specifically, a total of SEK 7.16 billion of the SEK 345.24 billion in assets under management was invested in absolute return strategies and hedge funds at the end of December 2017. This compares with SEK 12.54 billion in hedge fund investments (including investments in absolute return strategies) from SEK 324.38 billion in assets managed at the end of 2016. The latest annual report writes that AP3 focused on reducing exposure to hedge funds during 2017 and bringing back assets to be managed internally in an attempt to reduce total expenses.

“In the past 15 years, they have delivered 2 percent a year,” Lindeborg told Bloomberg. “That’s not very fantastic when the T-bill rate has returned 1 percent in the same period. And the correlation between the hedge fund index and the S&P 500 has been 0.75. So, there is a very low diversification contribution to have hedge funds if the correlation is that high,” added Lindeborg.

However, the hedge funds AP3 is currently invested in “have delivered a good return” according to Lindeborg. Nonetheless, the fund “won’t allocate a big part of the fund to hedge funds because of the track record and the fee structure. But the hedge funds we hold also give added value in the form of research and insightful discussions about the market.” AP3 was invested in seven hedge funds at the end of 2017, including two global macro funds and two credit funds.

“You see the success stories and read about them,” Lindeborg told Bloomberg. “But you don’t see the broad mass of failures. Very little is written about them. It’s difficult for me to see that hedge funds will be a big part of AP3. Based on their track record and fee structure, hedge funds have a lot to prove.”

Subscribe to HedgeBrev, HedgeNordic’s weekly newsletter, and never miss the latest news!

Our newsletter is sent once a week, every Friday.

Eugeniu Guzun
Eugeniu Guzun
Eugeniu Guzun serves as a data analyst responsible for maintaining and gatekeeping the Nordic Hedge Index, and as a journalist covering the Nordic hedge fund industry for HedgeNordic. Eugeniu completed his Master’s degree at the Stockholm School of Economics in 2018. Write to Eugeniu Guzun at eugene@hedgenordic.com

Latest Articles

Ridge Capital Expands Team After Hitting €100 Million Milestone

Stockholm (HedgeNordic) – With its unconventional high-yield bond strategy now exceeding €100 million in assets under management, Ridge Capital is expanding its portfolio management...

“7 Years, Niller, Then You Know a Thing or Two”

Stockholm (HedgeNordic) – There is a Danish saying that goes, “7 years, Niller, then you know a thing or two,” suggesting that seven years...

Brobacke Gains 7.6% in Early July, Predicts Continued Bull Market

Stockholm (HedgeNordic) – After a relatively flat first half of 2024, marked by noticeable month-over-month volatility, discretionary macro fund Brobacke Global Allokering advanced 7.6...

Kristofer Barrett Back to Managing Tech Fund

Stockholm (HedgeNordic) – Kristofer Barrett, the former portfolio manager of the multi-billion-dollar Swedbank Robur Technology fund, has returned to managing a technology-focused equity fund....

Tidan’s Resurgence Amid Markets Needing a Touch of Magic

Stockholm (HedgeNordic) – In late 2021, Michael Falken and his team at Tidan Capital launched a hedge fund employing a capital structure relative value...

The Value of Short Selling for Symmetry

Stockholm (HedgeNordic) – Stock-picking hedge fund Symmetry Invest has achieved a net-of-fees annualized return of 18 percent since its inception just over 11 years...

Allocator Interviews

In-Depth: High Yield

Voices

Request for Proposal

- Advertisement -