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Impact Investing

IPE special report May 2018

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Sainsbury’s scheme doubles hedge fund allocation

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UK - The £3bn (€4.4bn) pension fund of retailer J Sainsbury has doubled its exposure to funds of hedge funds - investing new money and resources diverted from passively managed UK equities.

Allocation to hedge funds had gone up, from £25m or 1.66% of the portfolio in 2004, to 3.33% or £90m.

The pension fund last year tapped hedge fund boutique La Fayette and Financial Risk Management (FRM). This year the two managers’ mandates have been increased to about £45m each, mainly thanks to new money inflows, said pensions manager Geof Pearson.

Pearson added that some of the new funds allocated to hedge funds had also been diverted from the UK equity portfolio, managed by Legal & General and Hermes Pensions Management.

“The decision was made in response to a resilient first year's performance in difficult market conditions from the fund of hedge funds managers,” La Fayette said in a statement. Sainsbury invests in La Fayette’s Regular Growth Fund, a multi-strategy, multi-manager fund of hedge funds.

John Capaldi, head of product management at FRM, said the firm’s £45m slice of Sainsbury assets are invested in a multi-strategy fund, which features 14 different hedge funds styles and is operated by 65 managers.

Capaldi explained it was a low-volatility, low-correlation choice. He also said that FRM had $14bn under management.

The J Sainsbury Pension Fund’s intended asset allocation is 55% to equities, 35% to bonds and 10% to alternatives, Sainsbury’s Pearson told IPE.

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