Only one in every 60 proposals by hedge funds to institutional investors results in investment, research has found.
A survey of 50 institutional investors worldwide by US researchers Preqin suggests hedge funds are continuing to have difficulty in raising capital more than a year on from the credit crisis.
Between June 2007 and June 2009, hedge funds were rescued from large losses by strong second quarter performance last year.
Data analysts Hedge Fund Research shows they have made 11% since the crisis, but Preqin still found 10% of institutional investors are making just one fresh investment in the sector per year.
"Conservative, long-term investors such as public pension funds generally make fewer new investments on an annual basis," the research said.
Some 20% of investors surveyed made more than 10 new investments each year, with the remainder sitting between 10 and 20 new commitments.
However, even if pensions reject hedge funds the first time around, three quarters are willing to reconsider their decision if market conditions or their own investment objectives change, the research found.
Those hedge funds which are finally selected for allocations must wait, on average, between three and six months after the initial rejection, Preqin added.
Almost one quarter of investors said they made a decision on whether or not to invest within one month, while one quarter said they could take up to 12 months to decide.
Preqin says: "The decision making process varies greatly between institutional investors. Those that are accountable to boards or other monitoring authorities such as pension funds or foundations will take the longest to carry out the due diligence on funds. Less restricted investors such as family offices and funds of funds will carry out all due diligence a lot quicker."
Getting the nod from pension, and other institutional investors, is now key for hedge funds, the researchers added, as 72% of capital comes from these sources.
France's NewAlpha Asset Management announced on Friday it was raising up to €200m from Europe's institutional investors and sovereign funds by October for Genesis 4, its latest hedge fund seeding fund.
This week's edition of Professional Pensions is out now
Collective defined contribution (CDC) schemes will need clear and transparent governance frameworks, as well as effective communication strategies, to be a success, the Work and Pensions Committee (WPC) has been told.
The aviation sector's constant evaluation of mistakes to improve safety should be applied to defined benefit schemes, as too many are making the same mistakes again and again, latest research shows.
A month of strikes are due to hit 64 universities from tomorrow over major reforms to the Universities Superannuation Scheme (USS).