New York (HedgeCo.net) – Over the last five years, corporate pension funds have quadrupled their allocations to hedge funds, but some of those funds may be having regrets as the hedge fund industry has lagged the overall market during this bullish phase.

According to hedge fund research firm Preqin, private sector pension funds now account for nearly 20% of investments in hedge funds on a global basis. This makes private pension funds the second largest investor in hedge funds, behind only public sector pension funds. Five years ago private sector pension funds were fifth in terms of total allocations to hedge funds.

As has been well documented, the hedge fund industry as a whole has lagged the overall market for the better part of the last five years. However, as we at HedgeCo.net and HedgeCoVest.com have noted, during a raging bull market, hedge funds are more likely to lag the overall market. When the next bearish phase hits, the hedge fund industry as a whole is likely to outpace the overall market.

A recent Wall Street Journal article included a quote from Jim McKee, head of hedge fund research at pension fund advisory firm Callen Associates. “There’s certainly regret, the last five years have been disappointing for pensions invested in hedge funds,” stated McKee.

Of course they regret moving to pension funds during the second biggest bull market in history. They also regret not being more heavily invested in hedge funds during the two bear markets we have experienced already during this century.

Rick Pendergraft
Research Analyst
HedgeCoVest