From today’s WSJ via Albourne Village. Italics and parenthetical comments added by Hedge Connection
“The Wall Street Journal reports: One of the U.K.’s biggest pension plans is moving forward with a strategy to invest hundreds of millions of pounds in alternative assets, potentially including hedge funds for the first time [One of UK’s largest pension funds – no hedge fund exposure, check]. The £10.6 billion ($16.8 billion) [!!] U.K. pension fund for oil company Royal Dutch Shell Group PLC agreed to a new strategic investment plan over the summer, according to a recent report to members of the pension plan. This includes a 5% allocation to alternative assets — a category that includes hedge funds, infrastructure, and commodity funds [5% of $16 billion = $800 million].The allocation will come on top of the 5% it already has invested in private equity.
There are a few noteworthy items in this post that only garnered attention because of the slow news day.
1. Who woulda thought that Shell did not have HF exposure? Commodities, I can imagine as it is one ginormous living breathing commodities factor exposure, but hfs? that surprised me.
2. They are following the usual gameplan for pension funds which is to create an “Alternatives” bucket and toss in anything that is not public or private equity or fixed income.
3. I suspect that as a result of last year EVERY pension fund is emerging from their asset liability study and realize 1. good golly, we are underfunded and 2. we can’t (tax/wrestle contributions) from our dependents so need to make it up with returns…and those returns are coming from hedgistan.
4. The next announcement will be end of 2010 or early 2011 for these late-movers. It is when they realize that when they compare their long-only equity exposure to their hedge fund, they are getting better (after fee) returns and less vol from the hedge funds and begin cutting back on straight beta exposure. Watch this space.
This is a good thing for the growth of the industry on a number of levels.