Once the preserve of rich investors, endowments, and foundations, hedge funds nowadays acquire 75% of their resources from institutional investors, including 25% from pension funds. In the U.K., where defined benefits pension plans are known for their prudent if not conservative investment policies, fully half allocate at least part of their assets to hedge funds.

In a low-interest rate world, alternative investments may provide some relief – and unexpected benefits too. In today’s financial markets characterized by very low interest rates, higher-than-expected risks, and high volatility in equity prices, investing for the long term is a challenging proposition. Decent returns, even at the unexciting level of one two percentage points above inflation, may be difficult to achieve without bearing substantial risk.