Cerulli Estimates Hedge Funds to Grow Faster than Mutual Funds

Cerulli says global hedge fund assets will rise at a compound annual growth rate of approximately 12.1% between 2009 and 2013, while the comparable figure for mutual funds is approximately 9% to $23.9 trillion. The estimates are based on Cerulli’s forecasts and data from HedgeFund.net.

“The recovery in hedge fund assets will be due, in part, to improvements in governance, increased transparency, and better terms for investors, such as lower fees,” said Sunil Jagtiani, a London-based editor for Cerulli, according to a press release. These improvements are arising as buyers, particularly institutional investors, and regulators pressure hedge fund managers to address problems highlighted by the financial crisis, the announcement said.

The crisis sparked a slide in hedge fund assets from $2.9 trillion in 2007 to $1.9 trillion last year, and to an estimated $1.8 trillion in 2009.

The Cerulli publication explains that the demand for hedge funds over the medium term is set to come more from institutions, like pension funds, rather than from very wealthy private investors. “But institutions are demanding a better deal and becoming much more discriminating both for investments directly into hedge funds and into funds of hedge funds, the primary distribution channel for the sector,” Jagtiani said.

In addition, Cerulli notes that hedge fund and mutual fund firms have been launching hedge fund-like strategies within mutual fund wrappers in the wake of the financial crisis, to address concerns about liquidity and governance, and Cerulli says that trend is set to continue.

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