Stenham, Liongate Share £40 Million Allocation

Wed Jul 23, 2008 3:27am EDT

LONDON (HedgeWorld.com) - Two funds of hedge funds have shared a total allocation of £40 million ($80 million) from the pension scheme of the Newsquest Media Group, a major U.K. regional newspaper publisher wholly owned by Gannett Co. Inc.

Stenham Universal Fund, a multi-strategy fund of hedge funds, is getting an allocation of £25 million, while Liongate Capital Management LLP's Multi-Strategy Fund is getting £15 million. Liability Solutions, an investment consultancy specializing in absolute return and funds of hedge fund mandates, advised the scheme and the tender process leading to the allocations.

"U.K. pension funds have more money in Royal Dutch Schell shares than in hedge funds," Harry Wulfsohn, director and head of institutional business with Stenham Advisors, said in an interview. "So I think the reality is that the U.K. pension fund industry has a long way to go to embrace hedge funds."

The allocation is significant, amounting to 10% of the £400 million in Newsquest's final salary scheme. The poor market performance of both equities and bonds over the past year has hurt pension schemes and caused particular problems for final salary ones with defined liabilities, leading to pressure to diversify in order to reduce volatility and increase returns.

A source with knowledge of the decision making behind the allocation said many U.K. pension funds are looking closely at alternative investments. "And I think that is a trend that is increasing," the source said.

Stenham manages $3 billion in funds of hedge funds and segregated accounts as well as running $3 billion in physical property investments. Liongate manages more than $3 billion in assets through multi-strategy and strategy-specific funds of hedge funds.

Hedge fund managers are keen on the potential to grow allocations from U.K. pension funds. "As an industry as a whole, the weighting is only 1% to 2%," Stenham's Mr. Wulfsohn said. "It has materially changed from zero in the last five years but it is still low."

"The selected managers were both able to demonstrate their ability to add value during different market conditions," said Phil Irvine, director of advisory services at Liability Solutions, in a statement. "The combination of both managers should produce superior, risk-adjusted returns in a manner broadly de-correlated to major market indices."

In other allocation news, Nedgroup Investments, a fund of hedge funds provider, has won a $9 million allocation for its Premium Portfolio Fund from Dutch investment manager Attica Vermogensbeheer BV. Since launching in February, the fund has raised about $35 million from institutional investors.

The fund has returned 3.04% since launch compared with a fall in overall fund of hedge fund indexes as estimated by Barclays and EurekaHedge indices of between negative 2% and negative 2.5% for the first six months of 2008.

"When launching the fund, our aim was to provide returns that were genuinely uncorrelated with market movements," said Andrew Lodge, managing director of Nedgroup Investments, in a statement. "Attica's investment is a real endorsement of that aim and a very positive sign for the future of the fund."

BMcIntosh@HedgeWorld.com

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