The Times has reported that Railpen, the pension scheme that looks after the retirement savings of 380,000 railway workers, will move at least 540 million into hedge funds this year.
Chris Hitchen, the chief executive of Railpen, has said that the 18 billion fund would have about 1.4 billion invested in hedge funds by December.
“We have been divesting our equity portfolio to buy other asset classes, such as private equity, property, hedge funds and infrastructure,” says Hitchen.
“We went into infrastructure assets last year, but they’re somewhat overheated, so we’re trying to make sure we don’t put all our money in at the same time.”
A recent NAPF survey indicated that 11 per cent of pension funds had invested in hedge funds by the end of 2006, up from 8 per cent the previous year. There were also rises in the amount of money that pension funds invested in property, private equity and venture capital as part of a wider move out of equities in 2006. About 40 per cent of final-salary schemes reduced the amount they had invested in the stock market last year.
Hitchen says that despite concerns about the stability of the hedge fund industry, the funds could provide returns that were more stable than equities.
Railpen targets a return of 4 per cent above Libor, a benchmark tracking UK bank interest rates.