Reuters.uk – Weak returns stemmed the flow of money into hedge funds late last year, but panellists at a conference said growth of assets in the industry will pick up as institutions continue todiversify their portfolios.
Data from Chicago-based Hedge Fund Research showed investors pulled $824 million (470 million pounds) from the funds in the last three months of 2005, the first quarterly fall in more than a decade.
However, the industry’s assets have doubled to more than $1 trillion since the technology bubble burst in 2000 and prompted interest in hedge funds as a way of diversifying away from traditional assets such as equities.
Estimates of hedge fund assets by the end of this decade typically fall between $2 trillion and $5 trillion.
“There is a sea-change in the attitudes of trustees of pension funds,” said Dan Shapiro, a partner at law firm Schulte, Roth & Zabel, at a hedge fund event on Thursday organised by UK-based fund manager The Fortune Group.
“Trustees are under pressure … to invest with managers who will protect their assets and have a chance of making money … We see enormous growth in that area (hedge fund assets).”
Hedge funds are seen better able to protect their assets because they can use derivatives and short sell — bet on an asset price falling — to limit losses.
