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Send in the Clones

Swedish pension fund AP7 is turning to hedge fund replication strategies to stay out of the headlines. "When underlying hedge funds run into trouble, the media risk is quite high," says Richard Grottheim, CIO of AP7, which has Skr1.6 billion invested in funds of hedge funds. "Even if you have a diverse fund-of-funds portfolio, it can be tough to deal with that issue."

Public pension funds don’t like drama. For this reason they often regard hedge funds with a wary eye. Although such investments can generate enviable returns, they can also produce headline-grabbing losses that public plans like Stockholm-based AP7 would prefer to avoid. In 2007, AP7 — the biggest defined contribution fund

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