Investors are getting too sophisticated to buy into the theory that hedge funds that produce the highest returns are the better choice. According to Lipper HedgeWorld, in fact, those big rollers are not rocking asset wise. Take, for example, GEM Global Equities Management. The $430 million Bahamas-based emerging markets hedge fund has returned an astounding 91% this year so far, but since launching its PharmaInvest Fund Oct. 1, it’s attracted a mere $120 million. Then there’s GazInvest, managed by GEM, which has returned 1,173% since inception, but has $28.4 million AUM. The reason for the small presence of both, suggests Lipper HedgeWorld, is the risk investors are increasingly less willing to take. In the case of GazInvest, the problem may be that it invests in just one company. PharmaInvest’s decision to invest mainly in one country may be a negative, despite its performance, since investors by and large prefer diversity. Limited investment is not the only factor, however. GazInvest’s failure to thrive is also linked to the fact that "hedge funds are not distributed," E. Lee Hennessee of The Hennessee Group told Lipper HedgeWorld. "Also, investors have become more sophisticated. They know a pink sheet in Russia is risky. In addition, the Russian market does not have securities laws." Hennessee noted that a dozen years ago, people would readily invest in Russia despite the risk, and see returns of as much as 60%, but the 1998 debt crisis in that country has soured investors on taking such chances.