Deciding hedge fund allocations

Pension funds are intrigued by the promise of absolute and non-correlated returns from hedge funds. But how large should a plan’s hedge fund allocation be? Gallagher Polyn reports

Last year was the worst in US pension fund history. New York-based investment consultant Ryan Labs estimates aggregate US pension under-funding at 30.89% last year, worse than 2000’s record of 28.46%.

This crisis of returns has prompted many pension funds to look beyond traditional asset classes, to hedge funds, for non-correlated investments that promise equity-like rates of return and the low volatility of bonds.

But pension fund investors are unfamiliar with hedge funds. Many opt for symbolic