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KAI RYSSDAL: One of the biggest losers from Amaranth's bad bets is the public pension fund down in San Diego County. A couple of hours south of Los Angeles. The retirement fund for 33,000 county workers there lost an estimated $45 million from their Amaranth investment. Today the county pension board is deciding whether the big risks of hedge funds outweigh the potentially sweet payoffs. From KPBS in San Diego, Andrew Phelps reports.

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ANDREW PHELPS: For years, San Diego County's retirement fund was fat and happy. Hedge funds like Amaranth helped nearly double the pension pool to more than $7 billion. Earlier this year, an international journal bestowed the pension with Public Plan of the Year.

But since a $175 million investment in Amaranth went sour, pension trustees are now asking serious questions.

DIANNE JACOB: Would you characterize the alpha portfolio and the activity within it as gambling?

San Diego County Supervisor Dianne Jacob.

JACOB: Like taking $1.4 billion to a casino and gambling taxpayer money?

That's how much the retirement board invests in hedge funds. Some are asking, "Wait, the retirement board invests in hedge funds?" Amy Borrus is with the Council of Institutional Investors, which represents public pensions nationwide.

AMY BORRUS: Pension funds may lack the expertise to really understand what they're getting into when they invest in hedge funds. Do I think that public pension funds will stop doing it because of these tales? No.

Borrus says hedge funds are increasingly attractive for pensions like San Diego County's, which is under pressure to pay for a 50-percent increase in benefits. The pension's chief investment officer says the county should stay in the hedge game because the risk is worth it. One trustee agreed, quoting Harry Truman: "If you can't stand the heat, get out of the kitchen."

In San Diego, I'm Andrew Phelps for Marketplace.