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New U.K. pension scheme rules out hedge funds-CEO

Date: Thursday, September 25, 2008
Author: Thomsonimnews.com

The Personal Accounts scheme is 'highly unlikely' to invest in hedge funds, private equity, but will consult on Shariah and ethical investments.

LONDON (Thomson IM) - LONDON, Sept 25 (Reuters) - The new Personal Accounts scheme is 'highly unlikely' to invest in hedge funds and private equity, according to the chief executive of the authority in charge of setting up the scheme.

Hedge funds have been blamed for adding to the current market volatility due to their role in short-selling stocks. Last week, the U.K's Financial Services Authority banned short-selling in financial stocks, followed by regulators in the U.S., Ireland and Australia.

The Personal Accounts scheme, which is expected to grow to 150 billion pounds in 50 years' time, has already indicated that its default fund will most likely be passively managed. The scheme will be launched in 2012 for UK workers without any pension cover.

The default fund is expected to gather around 90 percent of overall contributions as a result of individuals failing to make specific investment choices.

Tim Jones, chief executive of the Personal Accounts Delivery Authority (PADA) told Reuters, said: 'We will see, but my personal view is that it highly unlikely because that's not where our low to middle income earners are.'

Jones said the delivery authority would also raise the prospect of Shariah and ethical investments in its consultation which will be launched shortly.

The Personal Accounts scheme is likely to have around 10-12 funds for savers to select from.

'I would be surprised if we ended up with more than 10-12 fund choices, but the default could be 7 of those in some mixture. But we will consult on the various risk appetites that should be catered for,' he said.