Growth of Hedge Fund Assets: 15% Annually

September 19, 2005 ( - To further prove the growing popularity of hedge funds, new research by TowerGroup shows that combined hedge fund assets will grow at a 15% rate compounded annually between 2005 and 2008, to reach a growth of 75% during this period.

In its news release, TowerGroup says that in the coming years hedge funds will become more mainstream as institutions increase allocations to alternative investments, funds of hedge funds grow, and new retail investment products lower the barriers to hedge fund entry.

A recent analysis by Van Hedge Fund Advisors International showed that the current $1 trillion in hedge fund assets will grow to $6 trillion by 2015 (See  Report: Hedge Fund Assets Predicted to hit $6 Trillion in 10 years ).   As TowerGroup pointed out, all types of investors are looking to hedge funds to beat average market returns.

Other key findings from TowerGroup mentioned in the release include:

  • While hedge fund assets will grow significantly, the actual number of hedge funds will slow to a compound annual growth rate of 1%.
  • By 2008, hedge fund assets will cross the $2 trillion mark and over $2.5 billion will be spent on hedge fund administration services.
  • In response to the growth in hedge fund administration services, TowerGroup expects that fund administrators will invest $250 million in technology in 2008, up from $144 million in 2005, and technology spending by prime brokers will be $1 billion in 2008, up from $900 million in 2005.