Martin Roth, CEO of Pensionskasse Manor, talks to Carlo Svaluto Moreolo (IPE) about the fund’s diversification strategy and long track record in alternatives. Excerpts:
The fund has achieved a high level of diversification and has been among the best-performing Swiss pension funds in recent years, according to Roth. This is partly thanks to a large and long-term allocation to alternatives.
Roth says: “We started with a small allocation in 1999 and grew comfortable year by year. In terms of hedge funds, we started with an allocation to a single multi-strategy fund of funds, and slowly developed it into a dedicated allocation to different funds focusing on different management styles. Three years ago, we made the step towards single hedge funds, and today we invest around 52% of the portfolio into single hedge funds and the rest in six specialised fund of funds.”
The hedge fund portfolio, which represents a 12.5% share within Pensionskasse Manor’s strategic asset allocation, consists of 42% long/short equity strategies and 58% macro strategies. Roth says the fund had an allocation to quant strategies but it was discontinued because of poor performance in recent times. The hedge fund portfolio generated a net return in Swiss francs of 14.5% for 2020, and helped Pensionskasse Manor achieve an overall 6.8% return for the year.
The fund adopted a specific governance approach to hedge-fund investing, forming a dedicated four-person sub-investment committee to oversee the portfolio.
In private equity, the fund’s strategic goal is to obtain a net return of 3% over public markets, a target that Roth says has been achieved over the long term.
“The learning curve has been steep, and we have made our share of mistakes, but we have learned from them. We are also aware of the higher costs of our strategy, which is reflected in our total expense ratio, which is higher than average. But if you have a net return target of 1.8% and invest in an environment where the risk-free rate is well below zero, diversification through alternatives is all but necessary in our view,” says Roth.