Hedge Funds Regain Their Appeal for a $57 Billion Asset Manager
Hedge Funds Regain Their Appeal for a $57 Billion Asset Manager
(Bloomberg) -- With volatility back on the radar, one of the Nordic region’s biggest asset managers is considering relying a bit more on hedge funds to help oversee his portfolio.
Mikko Mursula, the chief investment officer of Ilmarinen Mutual Pension Insurance Co., says “we are feeling more positive about hedge funds than a couple of years ago.”
Mursula, who manages about $57 billion from Helsinki, says Ilmarinen currently relies on hedge funds for less than 2 percent of its portfolio. That ratio may grow, though it’s unlikely to exceed 5 percent, he said in an interview.
“My thinking is that we’re going to go to a higher volatility type of environment,” he said. “At least theoretically it should mean a much better operating environment also for active investors like hedge funds.”
Ilmarinen decided back in 2007 to rely more on internal hedging strategies. Including those operations, the pension fund actually allocates more than 10 percent to such strategies. Mursula says Ilmarinen opted to do more in-house at the start of the financial crisis because the industry wasn’t always transparent enough.
In house, Ilmarinen does “a lot of volatility types of strategies, a lot of momentum types of strategies, some equity long-short types of strategies,” he said. “One sub-asset class strategy we’re not doing in-house is linked to insurance risk.”
But a return of volatility doesn’t really change Ilmarinen’s strategy much. Mursula says long-term investors like him weren’t wrong-footed to the same extent as the rest of the market when volatility suddenly spiked in the beginning of February.
“It’s quite difficult for me to think there would have been a lot of pension investors out there who would have panicked,” he said. “We didn’t change our portfolio risk level at all.”
Ilmarinen Not Alone
At Varma Mutual Pension Insurance Co., which manages about $56 billion, the return of volatility is underpinning confidence in a strategy that already relies a great deal on hedge funds (Varma allocates about 17 percent of its portfolio to hedge funds).
“The big picture is that volatility is probably going to increase and the significance of tactical moves may increase compared to last year,” Reima Rytsola, Varma’s CIO, said by phone. That means the equity weight in the portfolio may fluctuate more this year, he said.
“We have quite a lot of hedge funds and their returns were very good last year,” he said. “Any significant increase is not in the books in the near term, though there may be some slight changes.”
To contact the reporter on this story: Kati Pohjanpalo in Helsinki at kpohjanpalo@bloomberg.net.
To contact the editor responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net.
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