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does speculation play an important role in their investments / asset management ?
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ideally what percentage of their funds are dedicated to pure speculative trading alone ?
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Yes, they do. In fact most of the Hedge funds (In India its AIF) do speculate in the derivative segments. Their speculative process are invariable sophisticated.
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Hard to say, some funds running upto 100’s of Million are dedicated for speculation.
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can you elaborate more about sophisticated speculative process ?
Well, these are proprietary trading models usually involving quantitative process. Unfortunately its not accessible to all. This book should give you a basic perspective - http://www.amazon.in/Inside-Black-Box-Quantitative-Trading/dp/1480590061