Friday 15 December 2017

Nobel fund looking for new investments

Toby Alder and Niklas Magnusson

THE Nobel Foundation, which this year chopped 20pc off its cash prizes, is planning to invest more money through hedge funds to boost its returns and restore the award to its previous size.

"When we look at the analysis we see that we can get more return with less risks by doing that," said executive director Lars Heikensten at an interview at the Nobel Foundation's Stockholm headquarters. "If we can choose hedge funds that we trust, then we can get better returns for given risks."

The fund "probably shouldn't" be fully invested in bonds, he said.

The Nobel foundation, created in 1900 at the request of Swedish industrialist Alfred Nobel to award prizes in physics, chemistry, medicine, peace and literature, this year cut the cash amount of its prize for the first time since 1949. The move followed a decade of poor returns, exacerbated by the onset of the global financial crisis.

"It was a difficult decision to take, since Nobel when he wrote his will made clear he wanted his money to be used for prizes," said Mr Heikensten, a former governor of the Swedish central bank.

An economics prize was created by Sweden's Riksbank in 1968. Alvin Roth and Lloyd Shapley shared the award this year for their work on matching supply and demand. Previous laureates include Milton Friedman and Paul Krugman.

The 2012 peace prize went to the European Union.

The Nobel foundation, which had 2.97 billion kronor (€342m) in investments at the end of 2011, cut this year's prize amount to eight million kronor from 10 million kronor to safeguard its capital.

"We live in difficult times and had not been as successful as one would have wanted in the last 10 years," Mr Heikensten said. The foundation "had in fact been spending more every year on average than" it had been earning, "and we had to do something", he said.

The fund has returned 1.5pc to 2pc, on average, over the past 10 years, below the 3.5pc to 4pc needed to keep its capital stable, according to Mr Heikensten.

Last year, half of the Nobel foundation's invested capital was in equities, down from two-thirds in 2007, according to its website. Over the same period, stakes in alternative investments such as private equity, properties and hedge-funds rose to a third from 12pc. Fixed-income investments were at 20pc, much the same as in 2007.

Alfred Nobel signed his will in 1895, a year before his death, stipulating that most of his estate of more than 31 million kronor – about 1.7bn in today's money – should be converted into a fund and invested in "safe securities".

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