The largest pension funds, endowments, and foundations in the United States and Canada had commitments to alternative investments of almost $70 billion in 1995—a 92 percent increase since 1992. Alternative investments composed an average of 5.5 percent of the total assets of funds that allocate dollars to this asset class, up from 3.6 percent in 1992. Public and corporate funds represented more than 86 percent of total dollar participation in alternative investments, while endowments and foundations, which commit a higher percentage of total assets than other funds, were relatively small in total dollars committed. Interest in international private equity has grown considerably and, along with venture capital, international private equity is identified as the most attractive alternative investment in the near future. The ability of alternative investments to outperform more traditional investments is the primary reason for participation in this asset class; perceived risk and lack of liquidity are the principal deterrents. Given the dynamism of the U.S. economy and growing demand for capital worldwide, a strong case can be made that alternative investments will become an even more important part of the capital markets.