Investors fuel booming hedge fund demand

INVESTOR demand for hedge funds has soared in the past decade, causing rapid growth in the number of marketing firms helping to raise capital for them.

Almost all of the 2,500 institutional hedge fund investors active today made their first investment in the asset class in the past ten years, according to research firm Preqin.

A record 253 new investors made their first hedge fund investment in 2010, Amy Benstead, manager of Preqin’s hedge fund research division, said. More than half of the investors made their first investment in the past five years.

“In 2011 growth could be very strong – we are already tracking 170 investors likely to make their first investments within the next 12 months and it is just the first quarter of the year,” Benstead said.

The number of hedge funds has also boomed to about 8,000 globally, of which about 4,000 are seeking to raise capital, according to Richard Watkins, founder of hedge fund placement firm Liability Solutions.

And an estimated 84 hedge fund marketing firms now assist managers with their fundraising – a leap up from fewer than ten a decade ago, Watkins said.