'Disappointed' investors still love hedge funds

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Even as the typical fund drastically underperformed the broader market, the hedge-fund business saw its biggest spike in capital inflows since 2007, a new study conducted by the hedge-fund data tracker HFR showed.

During 2014, according to the report released Tuesday, hedge funds received a total of $76.4 billion in new money, bringing total industry assets under management to a record $2.85 trillion. The inflows occurred even as returns in the HFR composite index slumped to 3.3 percent, a level far lower than the returns an investor would have received for simply tracking the stock index, which was up 11.4 percent. It was also the worst performance for the HFR composite since 2011, when it sustained losses of 5.3 percent.

To be sure, some hedge-fund strategies saw outflows of capital, notably, macro, or globally focused, funds, which experienced overall redemptions of $28 billion over the course of the year, according to HFR. Activist funds, on the other hand, experienced gains.