Pension funds were the biggest investors in alternatives last year, responsible for nearly one-third of inflows into the sector. A new report from Watson Wyatt shows alternatives adding some $250 billion in 2005, a 20% increase in assets to $1.26 trillion. Of the increase, pension funds accounted for $77 billion, with $62 billion of that going into hedge funds.
Pensions beat out high net-worth individuals as the largest investor group in alternatives in 2005. Mutual funds, insurance companies and foundations and endowments were third, fourth and fifth, respectively.
Among all investors, funds of hedge funds were the more popular destination for cash, taking in $85 billion. Real estate attracted $59 billion, and private equity funds of funds added $42 billion.