(Reuters): An academics' pension fund, the Church of Sweden and a biomedical charity are among conservative investors breaking with tradition and piling into hedge funds who are willing to curb their highest-risk bets to attract their cash. Five years into the financial crisis, volatile markets and rock-bottom interest rates have crushed the returns of charities and pension funds, making it harder to meet their liabilities in paying for their members' retirements. So many are now pinning their hopes on hedge funds to preserve, as well as grow, their money. "We invest in hedge funds to diversify and reduce risks, we are not looking for them to shoot the lights out," Mike Taylor, chief executive of the London Pensions Fund Authority (LPFA), said.

Institutional investors like the LPFA, which runs 4.2 billion pounds for state workers in the UK's capital, now account for two-thirds of hedge fund assets compared with less than a fifth in 2003, according to Deutsche Bank estimates.
Many funds are willing to adapt their higher-risk trading strategies to suit these more cautious institutions, because they usually invest for longer than the high-rolling wealthy individuals who once provided the bulk of their firepower.
But in demanding downside protection from their new funds, instead of high-risk strategies that can produce big returns - or similarly large losses - the investors could end up disappointed with how the hedge fund of the future performs.
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