MSN MoneyCentral – Hedge funds hold more allure than ever for pension funds looking to boost returns. That promises to remain true despite high-profile stumbles like the failure of hedge fundAmaranth Advisors LLC.
Even big pension funds that lost money on Amaranth are sticking with programs they have for investing in hedge funds, and they are upping the ante in some cases. The reason: hedge funds round out their portfolios and can offer better returns, sometimes at less risk.
Massachusetts, New Jersey, Pennsylvania and California are among states with public pensions that are exposed to Amaranth, a Greenwich, Conn., fund that unraveled after losing $6 billion in just one week in September trying to get out of bad bets on natural gas. In the case of the first three states, the investments were made through fund-of-funds advisers, a mutual-fund-like approach that helps to shield against losses by splitting up investments among several hedge funds.
