Hedge funds will become a mainstream force in UK investment and should be regarded as a fourth core asset class, according to Henderson head of marketing Sarah Speake.
Speake says: “From the research we have seen, by 2005, hedge funds will represent 14 per cent of funds under management in the UK.”
The prediction comes as product providers look for ways of lowering the barriers to entry which prevent the common use of hedge funds in the retail market.
Speake believes the regulator will look at ways of making hedge funds more accessible for retail customers, in spite of the FSA's warning earlier this year on the risks of investing in what it termed “exotic” hedge fund Isas.
Henderson anticipates retail growth in hedge funds will be generated by adopting the fund of funds approach.
City Financial Services director Mike Lightfoot says: “We have seen hedge funds offshore become mainstream very quickly over the last three years. In the UK, with gilt yields low and as with-profits faces increasing scrutiny, hedge funds will be a natural beneficiary of people wanting a third way when looking for a market neutral strategy.”
But Hargreaves Lansdown head of research Mark Dampier says: “I think there is still a long way to go to make hedge funds mainstream, as no one has yet made a highly marketable retail hedge fund product. Most IFAs will not want to get involved with hedge funds because of the business risk to them.”