Over the next five years, a large pool of institutional money will pour into hedge funds. Those funds with highest operational standards will catch the wave.
For several years, explosive growth has been the norm in the hedge fund industry. While that growth is not likely to abate any time soon, the source of new capital is shifting rapidly. Institutions - particularly pension funds - will become the primary source of capital for hedge funds. Their demands will change the industry.
To gauge the extent and likely effects of this shift, The Bank of New York and Casey, Quirk & Acito LLC published a comprehensive paper entitled: "Institutional Demand for Hedge Funds: New Opportunities and New Standards" This paper was the result of in-depth interviews with over 50 leading institutional investors, hedge fund managers and experts. We also surveyed over 80 participants at Institutional Investor's June 2004 Spring Hedge Fund Investment Roundtable. We asked: what are institutions' objectives in hedge fund investing? Where do hedge funds fit within the institutional portfolio? How is the role of fund of funds changing? How will hedge funds need to change to meet the demands of institutional investors?
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