Funds Hub

Money managers under the microscope

Where pension funds went wrong

Knut Kjaer, adviser to some of the world’s biggest asset pools, and former head of Norway’s government pension fund, told pension funds some home truths at the CFA Institute’s European Investment Conference on Tuesday.

Kjaer said the financial crisis had exposed two main pitfalls in institutional investment – the tendency to run with the herd, and the adoption of overly complex portfolios.

He was especially critical of investors who had made an allocation to hedge funds or private equity as a form of diversification without properly thinking through the implications for overall risk levels. He pointed out that some so-called diversified portfolios had performed very badly during the financial crisis.

So what is a poor pension trustee to do? Kjaer said they needed to construct portfolios that differentiated better between alpha and what is just costly beta: “Particularly in alternative assets you see a lot of beta dressed up as alpha.”

Time for a Horlick’s

Famed City ‘superwoman’ nicola Horlick is facing a tough fight to save her reputation after a move from the largest investor in her Bramdean Alternatives vehicle, property tycoon Vincent Tchenguiz, which could lead to her being ousted as investment manager.

Horlick, who once refused to hand over her valuable to a robber holding her at gun point, has already hit back at Tchenguiz. Bramdean Alternatives issued a letter on Thursday challenging him to substantiate his claims alongside a warnings that issuing misleading statements is an offence under the Financial Services and Markets Act.