The US state of New Jersey's $3.5bn (€2.7bn) allocation to hedge funds is another sign of a shift expected to double American institutions' allocation to the asset class by 2010, according to Freeman & Co, a corporate finance boutique.

New Jersey's investment council plans to allocate 13% of its $70bn assets to alternatives, saying it hopes to improve its risk-adjusted returns and beat the equity market. It forecasts a 5% allocation to hedge funds, which would make the state the world's largest investor in the asset class. However, others may have overtaken it by the time it completes its investment programme.