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Hedge funds continue to take a beating these days for allegedly being too costly, too complex and not worth the trouble for the kinds of returns they provide.

Some big and influential public pension funds, in particular, have soured on the use of external hedge funds to manage part of their assets.

But Canada's biggest pension funds still don't appear to be in any hurry to join the trend.

The pension fund for the Netherlands' health and social sector – Pensioenfonds Zorg en Welzijn (PFZW) – is the latest to announce it is ending its relationship with hedge funds.

It said on Friday it had "all but eradicated" the use of such funds by the end of 2014 and doesn't plan on dipping its toe in that pool any time soon.

"With hedge funds, you're certain of the high costs, but uncertain about the return," PFZW's manager of financial and investment policy, Jan Willem van Oostveen said.

That follows last September's decision by the $300-billion (U.S.) California Public Employees' Retirement System to re-allocate its $4-billion hedge-fund investments.

Here in Canada, the Ontario Teachers' Pension Plan says it continues to make use of external hedge funds, but with a lot of oversight.

"While we use external managers, we actively manage our holdings with them, as we do with all funds in which we are invested," Teachers spokeswoman Deborah Allan said in an email message.

"We employ hedge funds to earn uncorrelated returns, access unique strategies that augment our returns and to diversify our risk."

At the Caisse de dépôt et placement du Québec, the current strategy is to continue using external hedge fund managers for some of its assets.

The Caisse has only about 1.3 per cent of its assets in hedge funds so "it's very small," said CEO Michael Sabia in an interview.

"We use it less as a return-seeking vehicle because at that size, it doesn't really move the dial for us. But it does give us access to new thinking, innovative ideas, etc. So we use it as a window."

The Caisse had $3.7-billion of a $215-billion asset portfolio parked in hedge funds at the end of its last fiscal year.

About two years ago, Mr. Sabia said, a team at the Caisse "culled" the hedge-fund portfolio "pretty dramatically.

"We got it down to a group of funds that we are comfortable with in terms of how they operate, their level of transparency to us, etc."

Over at the Canada Pension Plan Investment Board, spokeswoman Linda Sims said in an email that "we do invest in hedge funds through our External Portfolio Management (EPM) program."

The program had $23.2-billion (Canadian) in notional assets with 55 managers, out of total assets under management of $219-billion, "but I cannot specify how much of that went into hedge fund investments – we do not break out that number," she said.

Teachers' had $6.2-billion in alternative investments, mainly hedge funds and managed future accounts, at the end of 2013.

Part of the logic for their continued use is that hedge funds help diversify funds' investment mixes and also provide expertise for sectors or regions of the world they are not familiar with.

But Montreal-based independent pension and investment analyst/blogger Leo Kolivakis believes the pension funds should stay away.

Most "hedge funds stink and most institutions shouldn't be investing in them because they're ill-equipped to understand the risks and forward prospects of hedge funds' performance," he said in a recent post.

Meanwhile, the folks at Toronto-based PWL Capital are telling active fund managers to hang in there.

"It cannot be easy watching institutions and retail investors aggressively shift their assets from active to passive funds…" PWL investment advisor Benjamin Felix wrote in a recent open letter posted on the firm's website.

"Try not to worry too much about Warren Buffett and CalPERS advocating for index funds. Just because they are two of the most well respected and influential figures in the investment world does not mean that they are always right."

With files from Nicolas Van Praet