The structural and magnetic properties of powdered composites consisting of nanosized Fe and Co particles embedded in alumina grains have been investigated. The composites were synthesized by a novel and simple method using co-precipitation from a hybrid gel solution containing layered double hydroxide and aluminium hydroxide. After a vacuum annealing procedure, the Fe composites have a negligible number of Fe(+3) ions and a high concentration of crystalline alpha-Fe nanoparticles having truncated polyhedron shapes with an average diameter of 20 nm that are physically well separated from each other. Magnetization measurements as a function of temperature revealed a superparamagnetic-like behavior characteristic of an assembly of fine particles. A spurious ferromagnetism related to surface interaction between magnetic particles from different powder grains and the formation mechanism of the composites are also discussed.