CalPERS, the country's largest pension fund, valued at over $295 billion at the end of 2014, notably pulled all hedge fund assets from its portfolio, about $4 billion worth of investments. 

A statement from CalPERS at the time said the decision was made as part of an "ongoing effort to reduce complexity and costs" in its investment program. 

"The recent news of CalPERS cutting hedge funds and reducing the number of private equity partnerships does not reflect wider sentiment in the industry," said Mark O'Hare, CEO of Preqin. "From our conversations with investors, the majority of investors remain confident in the ability of alternative assets to help achieve portfolio objectives." 

In a statement, O'Hare said a "much larger" portion of investors plan to increase their alternative exposure.

A controversial idea to allocate 15 percent of San Francisco Employees' Retirement System's funds to hedge funds was ultimately dismissed. Its investment board is expected to vote on a 5 percent allocation in the coming weeks. 

The Orange County Employees Retirement System has $1 billion of its $7 billion fund invested in hedge funds, according to Bloomberg News. 

In other finding from Preqin's report:

• Total private equity assets jumped to $3.8 trillion as of June 2014, up from $3.5 trillion the previous June. More than half to the fund managers surveyed by Preqin reported increased competition for deals in this area compared to the previous year.
   
• Real estate alternative assets climbed to $742 billion, up from $657 billion, driven by improved valuations. That said, improved asset value may ultimately slow alternative investments in real estate, as 66 percent of managers say it's getting harder to find attractive opportunities, according to the report. Real estate has returned 16.7 percent over the past three years.
   
• Infrastructure assets hit a record high of $296 billion, up from $244 billion the previous year. Preqin bills itself as the leading source of information for the alternative assets industry.