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terest in alternative investments, a significant gap has emerged between the culture and expectations of those investors and hedge fund managers. Pension plan sponsors typically require transparency from their managers and impose numerous restrictions on their investment mandates because of regulatory requirements such as ERISA rules; hedge fund managers rarely provide position-level transparency and bristle at any restrictions on their investment process, saying that restrictions can hurt performance. Plan sponsors require a certain degree of liquidity in their assets to meet their pension obligations and also desire significant capacity because of their limited resources in managing large pools of assets; hedge fund managers routinely impose lockups of one to three years, and the most successful managers have the least capacity to offer, in many cases returning investor capital once they make their personal fortunes. And as fiduciaries, plan sponsors are hypersensitive to the outsize fees that hedge funds charge and are concerned about misaligned incentives induced by performance fees; hedge fund managers argue that their fees are fair compensation for their In Theory: Hasanhodzic and Lo