E.ON pension scheme moves into hedge funds
GERMANY - A €5.4bn pension fund for German energy giant E.ON has begun making its first investment in hedge funds, employing both single and fund-of-fund vehicles, market sources have told IPE.
IPE understands in making the investments, E.ON is being advised by German consulant Alpha Portfolio Advisors as well as Mercer Investment Consulting although E.ON has declined to comment.
E.ON's pension fund, technically a contractual trust arrangement (CTA), was created two years ago to finance €5.4bn worth of obligations in Germany. It is one of the largest CTAs created in the past few years by big German firms traded on the Dax-30 equity index.
While the volume of the hedge fund investment is unknown, E.ON's buiness report for 2006 reveals the CTA was to allocate 10% of its assets to alternatives, now including hedge funds.
The CTA's remaining allocation was 69% to fixed income, 10% to real estate and 11% to equities, according to the report.
E.ON had already used Mercer for the search of managers for equity investments made by its CTA, but E.ON's hiring of Alpha as an adviser for hedge fund investments is another big win for the German consultant.
(See earlier IPE story for more information: E.ON taps consultant for pensions trust advice)
Beyond advising one of the biggest CTA's in Germany, Alpha was recently retained by the Bayerische Versorgungskammer (BVK), Germany's largest pension fund, for further investment in hedge funds.
IPE reported in its September issue the €40bn BVK scheme will increase its exposure to hedge funds from 5% of assets currently. (See IPE article: BVK leads the way on diversification).