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HSBC Trinkaus & Burkhardt has constructed a vehicle which allows the Ԉbn Nordrheinische Ärzteversorgung (NAEV) to invest in foreign hedge funds despite strict regulations by the German supervisor.
The private bank subsidiary of HSBC built a so-called Spezialfonds in the form of a single hedge fund which invests completely in fund of hedge funds. In line with regulations, it only invests 10% of the assets in each target hedge fund.
The vehicle known as the ASTRA (alternative strategies) Spezialfonds has already been approved by the supervisory body BaFin and is now open for all Pensionskassen.
'Every Pensionskasse can pick their own set of any number of hedge funds to invest in via the vehicle,' a spokeswoman for HSBC Trinkaus explained to IPE. She said following early discussions they already had a lot of interest in how the structure works.
While union representatives in Germany are demanding stricter regulation of hedge funds, the appetite for this alternative asset class among pension funds and Pensionskassen in the country is growing, the spokeswoman confirmed.
Following an asset liability study the NAEV fund figured it had to invest between 2% and 6% in alternative assets. However, direct investment in fund of hedge funds was not possible to a larger extent.
Until now, German institutional investors could only get exposure to hedge funds or fund of hedge funds domiciled outside the European Economic Area (EEA) via a Luxembourg fund vehicle or a certificate solution.
The Spezialfonds vehicle is preferred by many German institutional investors because they operate in a familiar regulatory environment with supervisor-approved reporting.