Posted on December 9, 2012

Nobel Foundation to Invest More in Hedge Funds to Boost Returns

The Nobel Foundation, which manages the assets made available through the will of Alfred Nobel for the awarding of the Nobel Prize in physics, chemistry, physiology or medicine, literature, and peace, is planning to allocate more of its endowment to hedge funds in order to boost its returns, Reuters reports.

Having reduced the amount awarded with each prize by 20 percent from 10 million kronor to 8 million kronor this year, the foundation is seeking to improve its returns, which have averaged 1.5 percent to 2 percent over the past ten years, or about half as much as its spending in the same period. In 2011, the market value of the foundation's invested capital fell 2.6 percent, to 2.97 billion kroner ($446 million), as a 9 percent drop in its equities investments overshadowed better returns from other asset classes. To help boost its overall return, the foundation has brought in advisors such as Sven Nyman, co-founder of independent fund manager Rational Asset Management, and Kent Janer, a senior manager of the Nektar hedge fund.

The foundation, which invests in inexpensive index funds as well as hedge funds, is also setting up benchmarks against which to gauge its performance relative to similar institutions and different asset classes. In addition, in an attempt to make its portfolio more manageable, the foundation will reduce the number of asset classes it invests in from forty to as few as twenty, Lars Heikensten, the foundation's executive director, told Bloomberg News. It is hoped, added Heikensten, that the measures will boost overall returns to 3 percent.

"When we look at the analysis we see that we can get more return with [fewer] risks by doing that," Heikensten told Bloomberg News. "If we can choose hedge funds that we trust, then we can get better returns for given risks."