One of the country's biggest local authority pension funds has taken the bold step of investing in the hedge fund market. Avon Pension Fund, which manages £2.1bn assets linked to former Avon CC, has placed 10% of its portfolio with hedge fund managers in a bid to improve returns. The fund runs the pensions for both the former Avon council and the four unitary councils which replaced it. Although not the first local authority to take up the option it is certainly the biggest. West Yorkshire Pension Fund has invested 5% and Lancashire CC's fund has invested 1%. Hedge funds are controversial as they produce more volatile returns than those invested in traditional equity markets. Tony Werth, investment officer for the Avon Pension Fund, explained the decision: ‘What we had was something long term to generate satisfactory returns, but predominantly equity-based, which was giving a lot of volatility from one year to the next. ‘Based on the returns hedge funds have provided in the past, we believe we can get similar returns with less volatility.'