UK pension funds quadrupled their rate of investment in hedge funds last year. Clients of Watson Wyatt and Mercer Investment Consulting, Britain's top two pension fund consultants, invested a total of £1.7bn (€2.5bn) in hedge funds in 2004. It is the first time a figure has been put on UK pension funds' growing appetite for the asset class.

With the trend likely to accelerate, a further £30bn is set to enter the market within five years. Pension funds are expected to offload equities to meet their increased commitment to alternative investments, including hedge funds.