When it comes to the actual investments we are evaluating each of them; and the consequence has been that we have moved some money out of some of the basic funds and into index funds. At the same time we’re looking at the possibility of having more money in hedge funds, where the return is higher relative to the risk than it has been historically in equity markets. If this is going to work well we need to have the capacity to choose effectively between hedge funds, and to do that we’ve been drawn to some extent on our good name, in finding people who can help us with that in the US and other places.
Aren’t hedge funds a high risk to take with Alfred Nobel’s money?
The foundation has taken very high risks before, during the 1980s for example, where we had a lot of money in property in Stockholm. That turned to be very successful, but I doubt that given the way the world works today that we would dare to have a strategy as risky as that. These days we will continue to spread things more broadly then we did in those days. And in the 1990s, we had a very high share in equities, which also turned out to be fine, but was also fairly risky a strategy. I think to some extent the not-so-good results during the last 10 years have been other side of the coin with respect to these investments. But it’s difficult to image that one could have been so clear-sighted at the time to move rapidly out of that.
So I am not implying in any way that we should be more risky than we have been before. But we could get a better risk-return ratio with hedge funds, as long as we are sure those hedge funds are well managed.
When do you think you will get back to the returns you made before?
What we are trying to do now is to get our cost ratio down to 3%; that means we will have to aim for 3% real rate growth. Under reasonably normal circumstances that should certainly be possible, but who knows?