During the past few months, we have posted a few words here on the quandary that is hedge funds. The first such effort was titled "The Hedge-Fund Manager Dilemma," and it explored the public's fascination with the hedge-fund crowd. The second, "Why Investors Love Hedge Funds," looked at why, despite stunning underperformance during the past decade, so much money was still flowing to the hedge funds.
Now, we are seeing early signs that some institutional investors are losing patience. Case in point: California Public Employees' Retirement System. The Wall Street Journal noted that the pension fund is looking to reduce hedge-fund holdings by as much as 40 percent. "Public pensions from California to Ohio are backing away from hedge funds because of concerns about high fees and lackluster returns."