Swiss Pension Funds Lead Europe In Use Of Hedge Funds

by Philip Morton, Investors Offshore.com

18 June 2001

Swiss asset management firm EIM, which provides investment management services to high net worth individuals and to fund managers, has launched a specialized alternative hedge fund aimed at its key Swiss pension fund customers. The 'AAA Alternative' fund includes four hedging strategies: long/short equity, global macro, event-driven and arbitrage strategies. EIM is aiming for 8% to 15% annual return and between 5% and 8% volatility in the fund. A minimum of 15 underlying managers will be used in the portfolio. The fund has a management fee of 1.5% and an incentive fee of 5%.

EIM says that it is now normal for Swiss investment management funds to allocate between 3% and 10% to alternative investment strategies. “The launch of AAA Alternative confirms that the hedge fund asset class has become an integral part of strategic asset allocation,” said Patrick Susse, chief executive officer of EIM. “We are convinced that the hedge fund asset class will continue to grow and make positive strategic developments in the long term.”

AAA Alternative, a liquid alternative investment sub fund to be launched on July 1, is part of EIM's Asset Allocation Access Foundation, and is the first offering of its kind to be approved by the Swiss Federal Office for Social Security, said Christof Mauron, analyst and manager of the AAA Foundation. Since the introduction of controlled deregulation, Swiss pension funds have been permitted to make hedge fund investments within predetermined guidelines. The Foundation holds total investments of about $250m.

The move towards alternative investments has happened quite slowly. “Only up to a few years ago, 1993 or 1994, most Swiss pension funds invested in bonds,” said Mr. Mauron. Nonetheless, Switzerland has been faster than other European pension savings markets to accept hedge funds. A recent survey said that Switzerland accounted for 90% of all such investment in Europe, with a total of $30 bn invested.

EIM however says that it is working hard to spread its offer in other European countries, and is in talks with a number of UK pension funds.

Recommended