The mediocre performance of hedge funds over the past few years hasn't turned off institutional investors.

The HFRI Fund Weighted Composite Index of hedge fund performance gained 3.2 percent in the first six months of the year, compared to a 7.1 return for the S&P 500 index.

But a total of 97 percent of 284 institutional investors surveyed by Credit Suisse said they plan to be "highly active" in devoting money to hedge funds in the second half of the year, CNBC.com reports. A total of 85 percent said they invested in hedge funds during the first half.

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"The money is coming from institutions, which are smart money, that understand the risk inherent in both the stock and bond markets right now," Brad Alford, chief investment officer of Alpha Capital Management, told CNBC.com.

"They are rebalancing back into the less risky asset classes like hedge funds that hedge."

Mark Yusko, founder of fund of hedge funds manager Morgan Creek Capital Management, told CNBC.com that stock-market gains have sparked some hedge fund allocations, as investors become over-weighted in equities.

Not all big investors are increasing their commitments to hedge funds. Numerous public pensions are shying away because of high fees and unimpressive returns, The Wall Street Journal reports.

Those cutting back include the California Public Employees' Retirement System (Calpers), the country's largest public pension fund.

Calpers will likely slash its hedge-fund investment by 40 percent this year to $3 billion, a source familiar with the change, told The Journal. A company spokesman said it's adopting a more "back-to-basics [investment] approach," according to the paper.

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