Institutional and high net worth money has been pouring back into hedge funds. According to Hedge Fund Research, which collects data directly from over 2,000 fund managers, hedge funds attracted $23 billion of net new capital in the third quarter of 2013 for a fifth consecutive quarterly record. All told, hedge funds manage $2.5 trillion, according to HFR, compared to the $14.6 trillion mutual fund industry.

But for some advisors, these investments have frequently been too risky or pricey for their clients. Until recently, only "qualified investors" and institutions could invest in hedge funds and even for a qualified investor, a hedge fund investment hasn't always been ideal: the minimums are high, usually over $1 million and commonly over $3 million, and the funds often charge a 1.5%-2% annual fee plus 15%-20% of any profits. So, an 8% return in a hedge fund becomes a 4%-5% return to the investor.

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