Railway Pension Investments Ltd., the British pension manager known as Railpen, plans to hire about seven hedge funds this year to manage 450 million pounds ($683 million) in assets.
The move comes as London-based Railpen, which oversees an 18 billion-pound pension system for U.K. rail workers, seeks to cut costs by shifting from investing exclusively in funds of hedge funds, which typically charge fees in addition to those levied by the hedge-fund managers themselves.
“We’ll end up with roughly half of our hedge-fund assets in the fund of funds, and roughly half in direct hedge funds,” Chief Investment Officer Keith Shepherd said in a telephone interview.
Railpen invests about 1.6 billion pounds in hedge funds, including 350 million pounds managed directly by three hedge funds it hired in the past year. Another 1.3 billion pounds is invested through two funds of hedge funds managers. Over the rest of the year, that will be reduced to about 800 million pounds, overseen by one fund of funds manager, Shepherd said.
Among the styles Railpen will consider, he said, are equity market neutral -- in which a manager can bet on both rising and falling stock prices -- and multistrategy funds, which invest in a range of hedge-fund strategies. Railpen hired consulting firm Albourne Partners Ltd. to help in the search.
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