Hedge Fund Industry Set to Surge in 2011

The hedge fund industry is poised to surge in 2011 due to a strong fund raising climate and a coming spike in new fund launches, according to the consulting firm Agecroft Partners.

Despite the negative publicity garnered by a recent spate of insider trading cases, Agecroft Chairman Don Steinbrugge said the industry approached an all-time high for assets under management in 2010 and will carry that momentum into the new year. He said the firm reached this conclusion after conversations last year with more than 300 hedge funds and 1,500 institutional investors.

Agecroft said its research found that capital inflows across a range of hedge fund investor segments, including endowments, foundations, and fund of funds will climb in 2011 as the liquidity problems generated by the crash of 2008 fade into the rearview mirror.

"This will especially benefit mid-sized hedge funds as these sophisticated investors tend to have a bias against the largest hedge funds," Agecroft Chairman Don Steinbrugge wrote in a release. The firm added that the hedge fund consulting market will continue to soar with a growing number of institutional investors set to invest directly in hedge funds.

"Pension funds will continue their evolution in how they achieve their hedge fund exposure," Steinbrugge wrote. "This process begins with an investment in fund of funds, followed by investing directly in brand name hedge funds, then focusing on alpha generators and finally changing the endowment fund model of "best in breed" hedge fund investing."

Meanwhile, the number of new hedge fund launches, which was pummeled in the midst of the global financial crisis, is set to rebound in a large way this year, Agecroft added.

"With improved asset flows across most major hedge fund investor segments, many of these managers will have the confidence to finally launch their new funds," Agecroft said. "This will make 2011 the best year for hedge fund launches since 2007." As the Senior Editor of Advanced Trading, Justin Grant plays a key role in steering the magazine's coverage of the latest issues affecting the buy-side trading community. Since joining Advanced Trading in 2010, Grant's news analysis has touched on everything from the latest ... View Full Bio