GERMANY – Bayerische Versorgungskammer (BVK), Germany’s largest pension fund with €38bn in assets, plans to raise allocations to hedge funds to €1bn by the end of 2006 - from €150m currently.
In late 2004, BVK decided to begin investing in hedge funds and hired German consultant Alpha Portfolio Advisors for three initial fund-of-fund mandates. Those mandates were awarded to one US hedge fund provider and two Swiss ones.
Speaking at a hedge fund conference in Frankfurt yesterday, BVK chief investment officer Daniel Just said the BVK would raise hedge fund allocations to €1bn by the end of 2006 and to 5% of total assets in the long term.
Just noted that in its first year of exposure to hedge funds, the BVK achieved a return of 7% - above its own target of 5% and above the average for the asset class in 2005.
Meanwhile, Christian Schlenger, managing partner at Alpha, confirmed to IPE that the consultant had been retained to advise BVK on its future hedge fund investing. The consultant handling the BVK account is Hubert Dichtl, who along with Jochen Kleeberg, Alpha’s other managing partner, published a handbook on hedge fund investing in 2005.
At the conference, Just pointed out that the BVK, as a Versorgungswerk, was not subject to German financial services regulator BaFin but instead was supervised by Bavarian financial authorities.
This implies that BaFin rules on hedge fund investing do not apply to German Versorgungswerke, which are pension funds that serve specific professional trades.
Just said that after the BVK submitted detailed plans for investing in hedge funds to the Bavarian supervisors, they were approved within a fortnight.
Prior to hiring Alpha for hedge fund mandates, BVK had entrusted the consultant with 18 equity, bond and balanced fund mandates worth €3bn.
BVK, comprised of 12 pension funds, had 1.3m contributing members and 252,000 pensioners at the end of 2004.