Dabbling in hedge funds

Pension funds have increased their capital allocations to hedge funds. But have they invested enough to make an impact? And what do they know about the real risks?

Hedge funds saw net capital inflows of $72.2 billion last year, according to figures published in February by Tass, a research unit of US-based fund of funds Tremont Capital Management. Institutional investors accounted for a large proportion of this new capital, says Tass, which derived its results from a survey of 4,565 hedge funds that manage $489.5 billion in assets.

But as is often the case when looking at the hedge fund industry, the figures can be deceptive. New research published by