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Nordic-Based Hedge Fund Investors Show Increasing Confidence in the Asset Class – January 2015

by Joseph Lee

  • 07 Jan 2015
  • HF

Nordic-based hedge fund investors currently account for over 8% of Europe-based hedge fund investors, representing a small but important source of capital for fund managers. Despite the slight decline in the number of Nordic-based investors allocating to hedge funds in recent years, those remaining have increased their exposure to hedge funds. In 2012, the group’s allocation to hedge funds was, on average, 7.5% of their assets under management, a figure that rose to 7.6% at the end of 2013, 8.4% in February 2014 and 8.9% at the end of 2014, indicative of increasing confidence in the asset class. Preqin’s Hedge Fund Investor Profiles online service tracks 88 Nordic-based investors currently investing, or looking to invest, in hedge funds. On average, these investors hold 13 funds within their portfolios and made their first investment to the asset class 10 years ago, illustrating the level of activity and experience that can be attributed to this investor group.

Sweden remains the main hub for Nordic investment, providing a base for 49% of all hedge fund investors in the region, as shown in the chart below. Finland-based investors make up 23% of allocators based in the Nordic regions, followed by Norway- (19%), Denmark- (6%) and Iceland-based investors (3%). Public pension funds and fund of hedge funds managers are the most prominent investor types, with each accounting for 19% of Nordic-based hedge fund investors. Other well-represented groups include private sector pension funds and insurance companies, making up 17% and 13% of Nordic-based hedge fund investors respectively. One notable investor in this group is Finland-based Veritas Pension Insurance Company, which allocates to a substantial number of hedge funds within its portfolio. The insurance company invests in a range of strategies, including distressed, long/short equity, diversified, long/short credit and managed futures/CTA.  

Nordic-based hedge fund investors have demonstrated a preference for Europe-based hedge fund managers (70%), while 41% currently have allocations specifically to Nordic-based hedge funds, suggesting that investors in the Nordic region appear to have a large appetite for local opportunities. Moreover, some Nordic-based investors have indicated a preference for alternative routes into hedge funds: 30% of investors have allocations to UCITS-compliant hedge funds, alternative mutual funds or hedge funds via managed account structures.

Though smaller in numbers compared to recent years, Nordic-based investors allocate a healthy and growing proportion of their portfolio to the asset class. Large institutional investors, such as public pension funds and fund of hedge funds managers, lead the way as the most numerous investor types hailing from the region. Nordic-based investors remain active investors in the asset class, with more looking to allocate to the hedge fund space over the next 12 months. 

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