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Alternative Market Briefing

Delegates discuss the impact of IFRS and Solvency II on hedge funds

Thursday, October 24, 2013

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Karl Trollborg
Beverly Chandler, Opalesque London:

The Opalesque 2013 Nordic Roundtable, sponsored by Estlander & Partners, Eurex and Taussig Capital saw delegates discussing IFRS and Solvency II and their likely impact on hedge funds.

Karl Trollborg of Wassum said: "I see two clear forces that stand out at the moment driving institutional investor behavior. One is Solvency II and the other IFRS. Both push some of our clients into more absolute return type of investments from equities or any other volatile investment. I don’t know the details of Solvency II, but one aspect of those pension regulations is to try getting less volatile returns and match it with their liabilities. According to IFRS, pension trust assets should be valued marked-to-market. That means the pension schemes' volatility is documented in each quarterly report, they basically get it into the quarterly profit and loss statement, which the corporates don’t like. And their banks seem not to like it either. So, it’s an issue for them. I mean, it’s a fluctuation that’s only on paper really, but it’s an issue anyway."

Trollborg felt that the phenomenon pushes them to look for more absolute return type investments. "So one sec......................

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