Pension funds should use the techniques of the best global macro hedge fund managers to control risk and volatility while producing absolute returns, the Cern Pension Fund chief executive says. Theodore Economou said pension funds should use the sophisticated risk management tools used by the best hedge funds to lower volatility and achieve better returns.
Cern invests its entire Sfr4bn (£2.75bn) pension fund as if it were a large global macro hedge fund. «We manage towards an absolute return target,» says Economou. «We believe our model can and should be replicated by pension funds with the same goals as Cern because we think the model represents an answer to the industry’s challenges.»
For those funds not able to replicate the Cern model, Economou advocates turning over the entire pension fund portfolio to a top hedge fund management company. If the hedge fund industry works together with pension funds, he believes it has the potential to grow five or 10 times larger than it is today. Economou made the comments at the European Single Managers Awards 2013 held in London, where Cern Pension Fund was given the award for outstanding contribution to the hedge fund industry by an institution.