Mark 2011 on your long-term calendars as the year when hedge funds will peak, or so suggests a report by Merrill Lynch. The ML study, which was released last week with the big news that passive strategies are the wave of the hedge fund future, also contained a chart, reports All About Alpha, suggesting that the industry’s “growth trajectory” is a “dead ringer” to that of mutual funds in the 1980s and 1990s. Based on that pattern, the number of hedge funds globally will peak in five years at “around 8,000 or 9,000.” Other signs of maturity gleaned from the Merrill Lynch report, taking figures from Hedge Fund Daily sister publication Alpha magazine, show as another sign of maturity a growing concentration in the industry: The 100 largest hedge funds hold 65% of total assets, while the remaining 6,000 to 7,000 hedge funds account for the rest. In fact, according to Alpha, that 35% group saw outflows last year, leaving a net growth of 2%, while the biggest hedge funds holding the most assets saw inflows of nearly 40%. The conclusion: There has been an apparent “flight to quality,” and the “bottom 5,700+ hedge funds actually experienced net redemptions.”
