As Chief Investment Officer of the Nobel Foundation, Ulrika Bergman is responsible for overseeing the foundation’s investment strategy to ensure the long-term financial sustainability of the Nobel Prizes. Throughout much of her tenure at the Nobel Foundation, Bergman navigated a low-interest-rate environment, directing a portion of the portfolio toward hedge funds as an alternative to fixed-income investments. Despite rising interest rates enhancing the appeal of fixed-income investments, Bergman has largely maintained the hedge fund allocation unchanged, driven by its strong performance.

From Fixed Income Replacement to Core Strategic Allocation

To offset the low yields of traditional fixed-income assets, the Nobel Foundation has maintained a hedge fund allocation that has at times exceeded 30 percent, more recently stabilizing around 25 percent. “Our 25 percent allocation to alternatives essentially comprises hedge funds, serving as replacements for fixed income with a risk-return profile between fixed income and equity risk,” Bergman told HedgeNordic in 2023. The rise in interest rates in recent years has made fixed income more attractive, leading the Nobel Foundation to consider reallocating part of its hedge fund portfolio to fixed income.

“I initially thought we would increase our fixed income allocation, but after conducting a strategic review about a year or two ago, we decided to maintain the hedge fund allocation at 25 percent.”

“I initially thought we would increase our fixed income allocation, but after conducting a strategic review about a year or two ago, we decided to maintain the hedge fund allocation at 25 percent,” Bergman tells HedgeNordic. “The reasoning was that hedge funds have delivered stable returns, delivering higher returns than we would expect from fixed income,” she explains. “That’s why we kept the hedge fund allocation unchanged.”

The Nobel Foundation’s Long-Term Objectives

The objective of the Nobel Foundation’s investment activities is to generate a sufficient long-term return in a responsible manner, ensuring the financial sustainability of the Nobel Prize and preserving the independence of the Prize Committees in selecting laureates. Specifically, the Foundation aims to deliver an inflation-adjusted return of at least 3 percent annually. The hedge fund allocation has been a key contributor to achieving the dual objective of delivering an inflation-adjusted return of at least 3 percent, while also maintaining a well-balanced approach to overall financial risk management.

“A stable source of returns, offering valuable diversification properties that can help mitigate risks in a risk-off environment, particularly if equity markets face challenges.”

Bergman and the foundation’s investment committee regard hedge funds as “a stable source of returns, offering valuable diversification properties that can help mitigate risks in a risk-off environment, particularly if equity markets face challenges.” She underscores that the Nobel Foundation’s investment strategy is inherently long-term – or better said, infinite – and, given the small team overseeing the portfolio, there are limited resources allowing them to respond to the constantly shifting market conditions. As a result, Bergman sees hedge funds as better suited to “make changes and adapt to the current market environment,” enabling the foundation to “outsource those very short-term tactical changes” to this segment of the portfolio.

The Benefits of Multi-Strategy for Smaller Investors

With the Nobel Foundation overseeing a relatively smaller portfolio of €544 million, compared to multi-billion-dollar institutional portfolios, Bergman and the investment committee have determined that investing in a select few diversified multi-strategy hedge funds is the most optimal approach. “We don’t have many hedge funds in the portfolio, given our smaller asset base, so most of them are multi-strategy,” says Bergman. “We are a small team with very limited resources,” she notes, explaining the preference for established, large multi-strategy hedge fund platforms. Bergman also notes that when choosing hedge funds, it’s important to consider the type of organization and its specific strengths and limitations. “You have to consider what type of organization you are, what advantages and disadvantages you have, and how that shapes your hedge fund strategy,” she says.

Bergman explains that while allocating to more niche strategies within hedge funds is not inherently wrong, it would require a much larger team on the Nobel Foundation’s side. “I’m not saying it’s wrong to allocate to more niche strategies within hedge funds, but doing so would require a much larger team on our end,” she emphasizes. “Instead, we outsource the decision of how to allocate between different hedge fund strategies to the multi-strategy funds. Given their expertise, this approach works very well for us.” She highlights further advantages of investing in multi-strategy funds, noting, “it’s less stressful to invest in multi-strategy funds, since the manager is handling the allocation and risk framework of the underlying strategies. This means that we don’t need to spend time on the underlying noise.”

“Instead, we outsource the decision of how to allocate between different hedge fund strategies to the multi-strategy funds. Given their expertise, this approach works very well for us.”

Bergman observes that multi-strategy funds are becoming increasingly popular among investors. She also notes a trend of larger firms growing even bigger, driven by a “war for talent” where the biggest players have the capacity and resources to attract top talent, acquire more data, and invest in the best tools. “It seems like this trend will continue,” she says. “In some ways, I’m a bit surprised, but with the rise of AI and other advancements, it still feels like people are crucial for trading. AI technology hasn’t fully replaced human expertise in this space.”

The Nobel Foundation’s hedge fund portfolio delivered a 13 percent return in U.S. dollars in 2024, positioning it among the top hedge fund portfolios of institutional investors in the Nordics. According to Bergman, the portfolio has provided “very stable returns over the years, with relatively low volatility.” She explains that, especially during periods of stress in equity markets, the hedge fund allocation has generally supported performance, offering valuable diversification. “While it hasn’t always helped immediately in a liquidity crunch, it has definitely contributed to diversification, and that’s the main benefit,” she emphasizes.

Unique Access and Long-Term Relationships

While the Nobel Foundation may be considered a relatively small player in the institutional investment world, its name and mission provide unique opportunities to access hedge funds that might be unavailable to other investors. “I believe it’s easier for us to invest in certain hedge funds that could be closed off to others. We definitely benefit from our name,” Bergman acknowledges. She adds that many hedge funds also find value in having the Nobel Foundation as an investor, as it can serve as a motivational tool for their personnel, emphasizing that the returns generated support a noble cause. “I’ve had conversations with several hedge funds where they’ve mentioned how having us as investors is a point of pride for their teams,” she notes.

“I believe it’s easier for us to invest in certain hedge funds that could be closed off to others. We definitely benefit from our name.”

However, Bergman also believes that long-term institutional investors, even those without the Nobel Foundation’s recognition, can gain access to exclusive funds by maintaining a consistent, long-term approach and fostering strong relationships. “If you’re a long-term investor, even without the Nobel Foundation’s name, showing that you’re committed and maintaining good relationships can still help you gain access to some of the more closed-off funds,” she concludes.

This article is part of HedgeNordic’s “Nordic Hedge Fund Industry Report.”