By Tommy Wilkes
LONDON Dec 7 The pension fund of Transport for
London, the government body in charge of the capital's transport
network, is putting more money into higher-risk hedge funds to
help to plug a funding gap.
TfL's fund is in the final stages of investing with hedge
funds Och-Ziff Capital Management and Arrowgrass Capital
Partners, and is set to boost its holding with Bridgewater
Associates, the world's largest hedge fund, TfL's investment
officer Padmesh Shukla told Reuters.
TfL, responsible for London's public trains, trams, buses,
bicycle system and the London Underground, known as the Tube,
plans to invest a quarter of its cash in so-called alternative
assets, including hedge funds.
That compares with 12 percent invested in alternative assets
for the year to the end of March, according to its 2012 annual
report, up from 10.1 percent a year earlier.
The 6 billion pound ($9.7 billion) TfL scheme joins the
pension funds of the Church of England and particle physics
laboratory CERN by hiking its investment in the secretive world
of hedge funds.
Conservative investors such as pension funds are keen to
diversify away from traditional asset classes like stocks and
bonds where returns have been disappointing in the past year.
The TfL pension scheme covers almost 83,000 current and
former employees. According to the most recent funding
valuation, dated 31 March 2009, the scheme's assets were 1.2
billion pounds less than the amount it expects to pay out.
"Trustees have decided to increase the exposure to
alternatives, including hedge funds, to improve the fund's
risk-adjusted returns," Shukla said.
TfL has chosen some of the biggest - and wealthiest - names
in the hedge-fund industry.
Connecticut-based Bridgewater is headed by Ray Dalio, who is
worth $10 billion, according to U.S. magazine Forbes. Daniel
Och, a former Goldman Sachs trader and founder of
Och-Ziff, has $2.3 billion in assets.
The pension fund also recently put money into Gresham
Investment Management, a commodities fund, and decided to reduce
its allocation to Guernsey-headquartered BlueCrest Capital
Management after shifting money out of its AllBlue fund and into
its International and Trend portfolios, Shukla said.
BlueCrest was founded by Michael Platt, worth 650 million
pounds, according to the UK newspaper, The Sunday Times "Rich
Shukla did not disclose the size of the planned allocations.
TfL already invests with hedge fund Davidson Kempner
Partners, the annual report shows.
The fund's biggest investment is in overseas equities, which
make up 40.4 percent of its assets. Some 16.5 percent of the
money is in UK government bonds and 15 percent in UK stocks.
TfL, created after taking over from predecessor London
Regional Transport in 2000, is controlled by a board chaired by
Mayor of London Boris Johnson.