The Nobel Foundation, which said last year it was using hedge funds to help boost capital, is now considering charitable donations after previous strategies failed to bring in enough money.
The Stockholm-based institution, which earlier this month rounded off its 2013 awards, cut the prize money by 20 percent last year in an effort to preserve capital. Since then, laureates have had to make do with 8 million kronor ($1.23 million) in each category. Lars Heikensten, executive director of the Nobel Foundation, says he wants to raise the amount again to restore the award’s status.
“There is a long-term problem if we want to raise the ambition level, which I’d like to see us do,” Heikensten said yesterday in an interview at the Nobel headquarters in the Swedish capital. “It’ll be difficult to save more and it will also be difficult to maintain costs at the current level. This indicates there will be a need for more money over time.”
The Nobel Foundation, created in 1900 at the request of Swedish industrialist Alfred Nobel to award prizes in physics, chemistry, medicine, peace and literature, is cutting costs after expenses outstripped income for a decade. Poor returns over the same period were then exacerbated by the onset of the global financial crisis. Given the circumstances, the foundation says it had no choice but to lower the prize last year for the first time since 1949.
Hedge Funds
Relying on hedge funds over standard equity indexes over the past year would have resulted in relative losses. The HFRX Global Hedge Fund Index rose 5.4 percent over the past 12 months, compared with a 17.6 percent increase in the MSCI World Index of stocks over the same period.
The foundation “should of course continue to try to improve our asset management, but I’m not sure that will be enough,” Heikensten said. He didn’t say which hedge funds were used.
The return of 7.9 percent on invested capital in 2012 was “a little bit better than our benchmarks,” Heikensten said. Returns this year have so far “been better” than benchmarks, he said.
The foundation tracks its returns against gauges that include pension funds and other asset managers as well a so- called normal portfolio, in which equities account for 55 percent of the total and alternative investments and fixed- income instruments make up 25 percent and 20 percent, respectively. Though it has stepped up its reliance on hedge funds in recent years, equities continue to make up the bulk.
Nobel Banquet