Future generations may have hedge funds to thank for the survival of the Nobel Prizes.
The Nobel Foundation plans to increase its investments in hedge funds in an effort to increase its returns. Investment losses of 18% over the last five years forced the foundation to cut the cash award attached to the prize by 20%, to 8 million Swedish kronor (US$1.2 million).
"When we look at the analysis we see that we can get more return with less risks by doing that," executive director Lars Heikensten told Bloomberg News. "If we can choose hedge funds that we trust, then we can get better returns for given risks."
Heikensten said the Nobel Foundation required a 3.5% to 4% return on its US$450 million endowment to maintain its capital base. It's instead earned just 1.5% to 2% over the past decade, and "had in fact been spending more every year on average than" it had earned.
The Nobel Foundation currently has 24% of its money invested in hedge funds and private equity funds, up from 6% five years ago.
Among the new managers entrusted with Alfred Nobel's bequest are Nektar Asset Management's Kent Janer and Rational Asset Management's Sven Nyman, both of Sweden.