£18 Billion British Pension To Boost Direct Hedge Investments

Mar 22 2013 | 10:57am ET

Another major pension fund is set to slash its fund of hedge funds portfolio in favor of direct hedge fund investments.

The £18 billion Railway Pension Investments plans to hire about seven hedge funds this year to manage £450 million. The move will be funded by a reduction in its fund of funds program; Railpen will terminate one of its two fund of funds managers to cut its exposure to £800 million from £1.3 billion.

"We'll end up with roughly half of our hedge-fund assets in the fund of funds, and roughly half in direct hedge funds," Keith Shepherd, Railpen's chief investment officer, told Bloomberg News. Cutting back on funds of funds is expected to save the pension on fees.

Railpen began investing directly in hedge funds last year, hiring three managers to handle £350 million. To assist with the next round of hires, the pension has engaged with consultant Albourne Partners; in particular, it is looking at equity market-neutral and multi-strategy funds.

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