Hedge funds ‘should be part of core portfolio’

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SWITZERLAND - Hedge fund investments should be part of the core as well as satellite portfolio – according to a professor at the Edhec French business school.

“There is a bright case for hedge funds to be part of the core as well,” said Lionel Martellini at a recent conference organised by Edhec in Geneva.

He said: “Hedge funds benefits are as much beta driven as alpha.” And he suggested they be included in overall asset allocation decisions.

But he warned against being tempted to consider hedge funds as an asset class but rather as a complement to existing asset classes.

Hedge funds were not necessarily seen as an “attractive stand-alone absolute return vehicle. Times are changing”.

Lois Chaillet, senior controller and global risk manager at ABP Investments, the asset management arm of the €171bn Dutch civil service scheme, told IPE: “It is a good idea, because it would be feasible.

“We have hedge funds exposure and additionally we have active strategies that we operate on the level of individual classes which could be seen as look-alikes of hedge funds.”

Commenting on whether ABP would implement Martellini’s ideas, he said: “If we were to use it would still require a lot of work, it is also very challenging.” ABP’s allocation to alternative investments, including hedge funds, is 20%.

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