While there is no explicit allocation to hedge funds as an asset class, Valtonen says in future, hedge fund-like structures could be an exotic beta play in the new strategies portfolio. “We have hedge funds in two places in the portfolio – first of all we have reduced our risk allocation to traditional active management and replaced part of that risk allocation with some types of hedge funds,” he says.

“We have a program with global macro CTA managers, which we see as an alpha play for us. Those managers replace some traditional stock pickers, so they are sitting in the alpha portfolio, but we recognise that there are other types of hedge funds that really are picking up different kinds of risk premiums that should do that as a more exotic beta play. If and when we invest in those types of managers, the natural place would be in the beta portfolio, and that would be within the new strategies allocation.”