Stockholm (HedgeNordic) – Aalto University’s endowment fund incurred a loss of 5.1 percent during the first half of 2022 amid wider market turmoil, as hedge fund investments helped dampen losses.
The endowment fund’s “alternative risk” building block, a portfolio of hedge fund investments accounting for 20 percent of the €1.29 billion endowment portfolio, returned 11.1 percent in the first six months of 2022. “Our hedge funds had a terrific H1 across most strategies,” Lauri Ström, Portfolio Manager at Aalto University Endowment, writes on LinkedIn.
“Our hedge funds had a terrific H1 across most strategies.”
The Aalto University endowment builds its €1.29 billion portfolio around several risk-based building blocks, including interest rate risk, credit risk, equity risk, and alternative risk. The “alternative risk” building block features market-neutral diversifying strategies such as trend following, systematic risk premia, equity market-neutral, global macro, relative value and arbitrage strategies, among others. The Aalto University endowment has a minimum target allocation of 10 percent to alternative risk strategies, with the exposure sitting at 20.1 percent as of the end of June.
“Alternative risk provided valuable diversification with positive contribution to return.”
“The first half of the year was dominated by inflation and growth risks, both amplified by the war in Ukraine,” the team running the Aalto University endowment writes in an update on the first half of the year. “This led to negative returns on both equity and bond markets. As a result, the first half of 2022 was one of the worst ever recorded for traditional investment portfolios,” the update continues. The endowment fund’s loss of 5.1 percent mostly stems from its exposure to equity risk. “Both interest rate and credit risk had small negative contribution as well,” writes the Aalto University endowment team led by Head of Investments Iivo Paukkeri. “Alternative risk provided valuable diversification with positive contribution to return.”