Disclosed are methods and apparatus for improving heat transfer of recirculating fluids within a system by introducing a ferrofluid in which iron oxide nanoparticles are suspended in a carrier fluid that is, in turn, added to a working fluid for increasing the heat capacity of the working fluid. The ferrofluid suspension can be prepared ex-situ and metered into the working fluid from a separate reservoir or may be prepared in-situ as needed through the use of an inline reactor. The ferrofluid can be introduced with other water treatment additives which are compatible with the colloidal suspension and monitored directly and/or indirectly for controlling the heat capacity performance of the system.