Søren Andersen, managing director of Danish consultancy Invensure, said: “All of the larger players are looking into and considering products such as ILS and hedge funds. They are looking for asset classes that actually have a true diversification and not just a statistical estimate of correlation, which is true for insurance risk products, for example.”

Pension company PKA is one of the players that is considering taking new asset classes on board.

“After last year, we are reconsidering our overall allocation to all asset classes. Our risk budget has changed and we have to take that into consideration. One issue has been that correlation between asset classes wasn’t as negative as expected,” said Claus Jørgensen, head of equities at PKA.

The company is now contemplating its first move into hedge funds.

“But we prefer to call them absolute return strategies and not hedge funds,” said Mr Jørgensen, who admits that hedge funds have a bad name in Denmark. “We are very selective and quite careful about these strategies. The problem is that a lot of these strategies are very expensive, and it is sometimes difficult to see how the value is created.”

Mr Jørgensen also confirmed that PKA is considering ILS and commodities. In fact, the company has already made its first investment in commodities, which is an asset class it started looking into more than six months ago.

However, Mr Andersen is not convinced that there will be an imminent rush into these new assets, although he is sure there will be some movement with regards to hedge funds. He says: “Whenever you enter into a new asset class, the CIOs will want to understand the nature of the product, so it’s a quite long process from interest to investment. I also think it’s scaring some CIOs that you need to rely on others to assess the risks of insurance products and they might not understand if it’s correctly priced or not.”

Printer friendly version

Email this article to a friend