Up to 4.8 million UK scheme members invested in hedge funds pay 36 times more in fees than they would for low cost alternatives according to SCM Direct.
The investment manager estimates UK schemes invested via hedge funds paid £2.85bn in fees and charges in 2015.
Lack of transparency means many members will be unaware of the true extent of their hedge fund investments or the costs.
A typical UK pension fund invests 6% of its assets in hedge funds, with many increasing their exposure in recent years, despite poor performance.
Pension funds investing via hedge funds are estimated to contain 4.9m members; 2.2m of which are invested through 31 different Local Government Pension Schemes (LGPS).
SCM Direct notes over the last five years a simple 60/40 strategy would have beaten the average hedge fund return by three to four times.
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