Although large institutions have traditionally avoided emerging markets hedge funds, preferring their emerging market mutual fund brethren, the lofty returns of these specialty hedge funds in recent years is evidently making these investors think twice about the risky sector, The Wall Street Journal reports.

Flows to hedge funds that specialize in emerging markets rose 13% in 2005 to $5.3 billion, up from $4.7 billion in 2004, bringing total assets in the sector to $44.5 billion according to data from Hedge Fund Research.

"Just about any institution you talk to wants some emerging-market hedge fund exposure," said Gary Kleiman of Kleiman International Consultants, which specializes in emerging markets.

One of the reasons institutions are preferring emerging market hedge funds to mutual funds is that stock markets in emerging markets are often small, whereas the hedge funds can invest in a wide variety of instruments, including debt securities, commodities, currencies, real estate and private funds. In addition, some argue, the influx of all of these investments is helping to stabilize these economies, with many restructuring their national debt to protect themselves against financial shocks.

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

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