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over the next three years. The company is managing over CHF120 billion ($70 billion) in policyholders' money.

In taking its next step in 1998, Swiss Life took a stake at RMF Group and created a joint venture, the Swiss Life Hedge Fund Partners. This new company would manage all Swiss Life's money in hedge funds and sell products also to external clients. RMF, an alternative investment firm in Pfäffikon, developed a multistrategy portfolio allocating to five different styles: equity hedged, event driven, global macro, relative value, and managed futures. Today, the portfolio has about 90 different managers. RMF helped determine the mix of strategies as well as which managers to use in each strategy. Siegrist says that after the Long-Term Capital Management incident in 1998, this diversified portfolio and the approach chosen helped to convince the board of directors of Swiss Life to stay in hedge fund investments, even if the investments have been performing under par at that time.

In June 1998, Swiss Life allocated $300 million. Swiss Life's objectives were a net return of 10 to 12 percent per year, an annual standard deviation of 5 to 6 percent, and a correlation to the stock market (S&P 500) of 0.03 to 0.40.

Siegrist says that since inception over $1.3 billion has been invested and the objectives has been met. The actual annualized return has been 11.7 percent, with a standard deviation of 5.4 percent and a correlation of 0.32. Over the past 12 months, the return has been 13.9 percent, standard deviation 4.0 percent, and correlation of 0.2 percent.

Further products were implemented in 2000, such as collateralized debt obligation and high-yield investments. By the end of September 2000, Swiss Life had invested over $2.5 billion in these asset categories.

In the future, Swiss Life will use managed accounts rather than funds as much as it can. This enables it to have more transparency and better-managed risk. In the funds, the lock-up periods are not flexible. With managed accounts, the management team can react quickly if the manager doesn't meet the set criteria or is performing badly.

In 1999, Swiss Life took another step. Swiss Life Hedge Fund Partners launched a new product. Here the client can invest in one of the previously mentioned five styles through a fund, can combine them together to fit specific needs, or can choose a combination of the styles decided by Swiss Life Hedge Fund Partners. Every style fund is composed of 15 to 20 managers.