Railpen Appoints New Hedge Fund Managers for £600 Million Portfolio

Railpen, the industry-wide pension scheme for the UK rail industry, has appointed three investment managers to oversee its hedge fund programme. The three managers, all based in the USA, are appointed after extensive research and investigation by the in-house investment team at Railpen.

New York based Blackstone Alternative Asset Management, Grosvenor Capital Management located in Chicago and The Rock Creek Group of Washington D.C. are the three hedge fund managers appointed by Railpen to take on the £600 million portfolio.

Each of the three managers is investing one third of the portfolio for Railpen and funding is now substantially complete. Railpen will be using managed accounts, in which the fund managers select the underlying hedge funds but the investments are held directly in the name of the client. Each manager has selected around thirty hedge funds resulting in a diversified portfolio.

Chris Hitchen, Chief Executive of Railpen said: “Our aim was to select a mix of investment styles and businesses and I believe we have achieved this with the three managers appointed. We were clear from the outset that the fund managers appointed would need to have both experience of and a willingness to work with large institutional clients, as well as the ability to construct low risk portfolios to meet particular client objectives.

“Both Blackstone Alternative Asset Management and Grosvenor Capital Management are wellestablished players. The Rock Creek Group is smaller but staffed with vastly experienced investors who came out of the World Bank to set up their own shop.

“The hedge fund universe is becoming ever more crowded, but Railpen is looking for safetyfirst, not stellar returns. I am confident our managers can meet our objectives and I look forward to growing with them in the future.”

Notes to Editors:

The Railways Pension Trustee Co Ltd (“Railpen”), provides pensions for 350,000 current and former members of the railways industry through its operating subsidiaries Railway Pensions Management Ltd (“Pensions Management”) and Railways Pensions Investments Ltd (“Railpen Investments”).

Assets of approximately £15 billion are placed with some 35 external fund managers.

The trustee for the scheme decided in 2004 to allocate up to 5% of the scheme’s £15 billion assets after careful study and extensive consultation with pensions committees of employers and members. Their aim is to invest in a highly diversified way at the lower end of the hedge fund risk spectrum. The benchmark for the fund is LIBOR, with an aim of 4% p.a. out performance net of fees over rolling three years.

In the initial stages of their search, Railpen took advice from Watson Wyatt.

Chris Hitchen is Chief Executive for the Railways Pension Trustee Co and currently also serving as the Chairman of the Investment Council of the National Association of Pension Funds (NAPF).