LONDON Pension fund ATP, which manages 609 billion Danish crowns ($112 billion), is set to invest 1 billion crowns a year in hedge funds as part of a plan to create an "all weather" portfolio, the fund's chief executive said.
Lars Rohde told Reuters on Monday the Danish Labour market pension scheme also planned to double its exposure to private equity.
From 2012, the scheme, which returned 8.5 percent in 2009, will increase its hedge fund and private equity allocation as it implements a long-term strategy aimed at achieving returns independent of market conditions -- what Rohde described as an "all weather portfolio."
"We have a plan that going forward we should contribute approximately one billion a year," he said on the sidelines of the EDHEC-Risk Alternative Investments Days 2010 conference.
"We are looking for people with a record or people we can believe in: good ideas, good execution, good risk management," Rohde said.
ATP currently invests most of its assets in-house using external managers only for asset classes that require expertise it lacks, such as hedge funds, emerging market securities and private equity.
It invests in hedge fund strategies through its internal alpha team, which has 5 billion crowns in assets to invest.
Rohde said the pension fund would only invest in hedge funds with high standards of transparency and accountability.
"I want to know what they are doing. A fair structure grants transparency and, secondly, I will not go where we are paying all the costs and we would then share the gains," Rohde said.
He added the scheme would ask for measures such as claw-backs on performance fees to assure it was getting a fair deal as well as for a clear statement of the risks involved.
"Talk plainly. Tell us where you are and what is the risk shape of your strategy. If that is not going to happen we will have new crisis and there will be huge pressure from the public to regulate this industry," he said.
Rohde said ATP was also investing less than 1 percent of its assets in emerging market equity.
As part of the alpha-oriented strategy, the scheme will also boost its private equity investments, which is now about 5 percent of assets to 10 percent.
It is also diversifying its real estate portfolio by adding timber investments. ATP currently has around 3 billion crowns in timber, mainly in the U.S.
"I think (this allocation) will grow in the years to come," Rohde said.
($1 = 5.429 Danish crowns)
(Editing by Karen Foster)