Hedge fund investment back on pension funds' horizons

Pension schemes are again making allocations into hedge funds, despite the negative performance from many funds – and therefore correlation with underlying markets – throughout the financial crisis. So why the interest? John Ferry reports

So much for absolute returns. The raison d’être of hedge funds was that manager skill would produce ‘alpha’ returns for investors rather than the ‘beta’ rewards long-only managers take for simply being exposed to the market. If hedge funds did what they were meant to do then their returns would not be correlated with the performance of equity indexes and the other regular market benchmarks. That, at least, was the theory. But when the financial crisis hit and markets went into freefall, it