As a result, investors are allocating capital to secondary investments to diversify their private equity programs.

Barberis and Shleifer present a model where investors allocate funds based on the relative performance of investment styles.

Merrill Lynch recommends that individual investors allocate as much as 10 percent of their fixed-income portfolio to them.

The Vanguard Group has created a guide to asset allocation in a 32-page booklet intended to help investors allocate money among stocks, bonds and cash.

Still, investors in this country allocate more than 90 percent of their equity investments to the stocks of American companies.

Mr. Kritzman found that, given these assumptions, the investor should allocate nothing to the basket of hedge funds and everything to the two index funds.

WHAT role did high fees play in his finding that an investor should allocate nothing to hedge funds?

He recommended that investors allocate no more than 10 to 20 percent of their portfolios to shares of the fund.

And while investors will allocate a bigger percentage of their investment assets to funds, the industry itself will experience consolidation, executives said.

Q. How should an individual investor allocate $100,000 in the bond market?