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such as Winterthur, Helvetia Patria, Zurich Insurance, and Swiss Life. The Swiss institutions are generally comfortable with hedge funds since Swiss private banks have been allocating proprietary bank capital to hedge funds for many years.

More entities are educating themselves. One example is the public employees pension fund in Zurich. European sources report Versicherungskasse der Stadt Zurich (VSZ) is seeking a manager to invest 2.5 percent of its assets, or SFR300 million ($176 million), in hedge funds.10

CMT Pension Trustee Services, which manages a $16.4 billion for the British Coal Staff Superannuation Scheme and the Mineworkers' Pension Scheme, has been asked by the trustees of both pension funds to prepare a research paper on alternative investments. It was reported that each entity was considering investing as much as 2 percent of its respective assets.

CASE STUDY INTERVIEW: SWISS LIFE INSURANCE COMPANY

Until 1987 Swiss Life Insurance Company had only about 2 to 3 percent of its portfolio in equities; the maximum allowed was 5 percent. Swiss pension law changed in 1985 to allow pension schemes to invest up to 50 percent in equities. Due to this change, the investment regulations for life insurance companies in Switzerland have been adapted in the same way. Fred Siegrist, head of investment strategy and risk management of the Swiss Life Group, said that equity allocation at the company increased to about 20 percent up to the mid-1990s. That was a comfortable amount considering its free reserves as a mutual company and the obligation to cover the liabilities at all times. Furthermore, local life insurance competitors limited equity allocations to 20 to 25 percent for the same reasons.

As time went on, Siegrist says they thought about the next step they could take in diversifying the company's portfolio. Looking toward the United States, they started to consider alternative investment strategies, especially hedge funds and private equity. In 1997, they made their first allocation to a fund of funds product launched in Switzerland. It was one of the first hedge fund of funds structured as a holding company and quoted at the Swiss Stock Exchange. Later in the same year, first investments were made in private equity fund of funds. Swiss Life decided to invest up to 5 percent in alternative investments of its portfolio