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Railpen sees bigger role for absolute returns

UK – Railpen Investments, part of the £15bn (€21.8bn) railways pension scheme, has said it sees an increasing role for the absolute return approach for pension funds.

“So the short answer to the question - does absolute return have a future for pension funds? - is yes, increasingly so,” says the fund’s head of asset strategy, Stephen Lowe.

In an item on a hedge fund web site, Lowe said it was not likely to be restricted to “the traditional asset categories which people might have expected from absolute return mandates in the past”.

He said the investments were more likely to be like a hedge fund fund-of-funds mandate.

The comments follow the Railways Pension Trustee Co.’s decision in March to allocate £600m to three hedge fund managers - Blackstone, Grosvenor and the Rock Creek Group.

London-based Railpen decided in 2004 to allocate up to 5% of its portfolio to hedge funds, taking advice from Watson Wyatt.

Lowe added that the main issue is whether tax authorities, fiduciaries and regulators will be happy to see assets migrate wholesale into hedge fund vehicles.

This was unlikely, he argued – so he called for “more clarity” about the tax and fiduciary status of taking on onshore managers to do this sort of task with larger, cheaper diversified absolute return mandates.

Lowe joined Railpen in 2001, having previously worked at Warburg, Gartmore and UBS.

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