A report by Reuters said activist funds is the new breeding ground of investors. The hedge funds industry is worth USD2.5 trillion in managed assets.

Based on data by Hedge Fund Research, activist funds drew USD7 billion in commitments from endowments and pension funds, which was more than double the previous year's amount. The states of New Jersey, Ohio and Massachusetts, including Blackstone Group had made commitments to invest in such funds.

Industry data indicated that the influx of investment money was based on company performance targets. For 2013, the mean return for hedge funds is 14.12%, which was not as strong as the 23% gain of benchmark gauge Standard & Poor's 500. However, the hedge funds' average return fared better than the average return of a hedge fund at 7%.

A major reason why investors turn to activist investing was because of the visibility of activists as compared to managers of hedge funds.

On the other hand, the report said the strategy conducted by activists could also result to public failures, of which would also put the targeted company's valuation on a tailspin dive.

William Ackman's three-year campaign to revive struggling JCPenney ended in August with his resignation from the retailer's board. It also resulted to him charging a USD500 million loss to his Pershing Square Capital Management.

Hedge Fund Research showed that around 60 in dedicated funds, including some new ones launched in the last two years, indicated how the high risks attached in activism had the 10,000 firm-strong industry only saw their types at a limited number. Activist funds control a combined USD89 billion in assets, which is a far number from the hedge fund industry's total USD2.5 trillion, said the Reuters report.

Regardless of these information, the report said it was hard to not pay attention how such funds had been doing well despite the massive risks. Pershing Square was able to record 8% in returns this year despite its failures at JCPenney and a USD1 billion bet on Herbalife's collapse. Herbalife is a nutritional supplement manufacturer. Pershing's returns were attributed to Ackman's activist campaigns at railway Canadian & Pacific and Procter & Gamble.

Even retail investors could capitalize on the activist funds' success. According to Morningstar, mutual fund 13D Activist which allows investors to place bets on companies that are targeted by activists managed to surpass S&P's gain by recording a 32.54% gain this year.