Hedge Funds To Account For Over 5% Of Global Assets By 2009

by Phillip Morton, Investors Offshore.com

11 June 2004

An alternative investment conference on Tuesday heard how hedge fund assets are expected to account for more than 5% of global financial assets by the year 2009, up from the current 2%.

In a survey organised by the organisers of the Global Alternative Investment Management Forum, more than one third of attendees forecast that hedge funds will be managing between 5% and 7% of the world’s financial assets in five years' time.

However, a significant proportion of the delegates predicted that alternative investment funds will play an even bigger role in the world’s markets. About a quarter responded that hedge funds will comprise 7% to 10% of global assets, whilst another third thought they could account for over 10% by 2009.

The findings would appear to confirm a growing consensus in the industry that hedge funds are set for a period of substantial growth in the medium term. A recent study by Platinum Asset Management has compared the current position of the hedge fund industry to mutual funds in the late 1970s which exploded from a total value of $15 billion in 1978 to $3 trillion two decades later.

With estimates putting the current value of assets under management in the hedge fund industry at around $1 trillion, Platinum believes this will reach $4 trillion by 2010.

However, many analysts are warning that such rapid growth in the popularity of hedge fund investing will soon begin to squeeze returns and limit the opportunities for managers to make the impressive returns seen in recent years.

"Too many sheep and not enough grass," is how Jerome Baesel, the managing director of Morgan Stanley Asset Management foresees how the future for hedge funds might look.

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