Reuters – Pension funds invest only a small fraction of their assets in hedge funds even as these lightly regulated portfolios pull in billions of dollars in new assets every month, a study releasedon Wednesday showed.
Hedge funds made headlines with out-sized returns in the 1990s and industry assets doubled to roughly $1.2 trillion in the last five years. In the first quarter of 2006, investors put $27.6 billion in hedge funds, Tremont Capital Management reported. But private investors and endowments, not pension funds, fueled most of that demand, consultants at Greenwich Associates wrote in a report.
U.S. corporate pension funds allocated just 0.9 percent of their assets to hedge funds while public pensions funds put in even less, sending only 0.7 percent into the asset class.
“Average hedge fund allocations for U.S. institutions are skewed upward by the sizable holdings of U.S. endowments, the pioneers of institutional hedge fund investing,” Greenwich Associates consultant William Wechsler wrote.
