Volatile markets and lacklustre hedge fund returns have not deterred institutions from putting money into these vehicles, a study says, pointing out that high net worth individuals are still the largest investors in hedge funds overall.

The share of hedge fund capital provided by institutions was unchanged from 2006 to 2007 following several years of steady growth, but the results of the 2008 study suggest that pension funds, endowments and foundations remain strongly committed to the asset class, according to a study by Greenwich Associates and Global Custodian.

Pensions, endowments and foundations directly provide 13 per cent of the average hedge fund's assets under management. Institutions also commit assets to hedge funds through their investments in fund of funds, which account for an additional 23 per cent of hedge fund assets.

"High net worth individuals and family offices remain the biggest sources of assets for the average hedge fund, accounting for 37 per cent of the total, which does not include about 10 per cent of assets provided by the funds' employees and general partners," says Greenwich Associates consultant John Feng.

For the world's biggest hedge funds, however, institutional investors have overtaken high net worth individuals and family offices as a source of assets. Twenty-five per cent of these funds' assets come from direct investments by institutions, while high net worth and family office investment account for 22 per cent.