Hedge funds are the rock stars of today's financial world. These slightly regulated pools of equity, which are open only to rich players, are managed through secretive and sophisticated investment strategies. Although the risks are high, so are the potential benefits. Despite the risks, many colleges and universities have chosen to invest heavily in hedge funds. One of those schools is DePauw University in Greencastle, Indiana. For a small institution, DePauw has a rather large endowment of approximately $470 million. The college's financial advisor, Hennessee Group LLC, recommended hedge funds operated by the Stamford, Connecticut-based firm Bayou Fund LLC. DePauw took the recommendation and invested $3.25 million, looking at promised returns of 15% to 20%. However, in late last August, Bayou, which was managing $440 million in hedge funds, quietly went out of business. Although some of the big university players appear to be cooling on hedge funds, their overall popularity doesn't seem to be slowing. In this article, the author discusses the factors underlying the growth of hedge fund investments by colleges and universities, and why they may trump the disturbing news of Bayou's collapse.