The changes in CalPERS’ hedge fund investments are the result of an analysis of the plan’s risk-managed absolute return strategy. When Kurt Silberstein, portfolio manager-absolute return strategies, took over the program in January 2003, 70% of the system’s assets were invested with U.S. long-short equity managers, that has now been reduced to 30% with the program now including eight specific hedge fund strategies.

Morgan Creek also has $1 billion that they plan to invest in hedge funds, strongly favoring energy trading funds for promising returns, since the energy markets are less transparent than equity markets in the wake of recent disclosure rules like Regulation FD.

Hedge fund investors are looking for managers and strategies that can generate exceptional returns as traditional strategies, such as equity long-short, become more crowded, experts said.