The study also claimed that by 2010, 25% of all institutional investors will be putting money into hedge funds, up from 15% now. It found pension funds will be their largest contributors in four years’ time, with US schemes accounting for the biggest percentage growth.
Kevin Quirk, a partner at Casey, Quirk and Associates said that in future institutions would have to generate greater returns and be more comfortable with concepts such as shorting, derivatives and leverage. “The study shows that today’s hedge fund techniques will be tomorrow’s mainstream investing,” he said.
The survey also claimed that as their techniques become mainstream, funds will be required to compete more vigorously in areas such as operational excellence, risk oversight and fee structures. However, it warned that underperformance, scandals or regulation could all slow predicted growth.
The study was based on more than 100 interviews with institutional investors, investment consultants, hedge funds, fund of hedge funds, and industry experts around the world. It follows up on a similar one conducted by the two firms in 2004.