Nearly half of institutional investors polled in mid-May — 45% — said they expect a major hedge fund blowup within the next year, while 31% said they had no expectation of a hedge fund meltdown at any time. Another 14% of those surveyed said they expect a blowup within two years, and 10% expect a significant hedge fund catastrophe within five years.
The survey was conducted by money manager Strategic Investment Group as part of its annual investment dialogue, a series of meetings of institutional investors on specific topics. Officials from 40 institutions, with assets totaling $350 billion, were polled during the May meeting in Washington, which focused on hedge funds.
Despite their wariness about individual hedge fund disasters, 42% of respondents said hedge fund investing is already "mainstream" for institutional investors, and 38% predicted it will be within five years. Just 17% of respondents predicted it will be more than five years before hedge fund investment is commonplace among institutional investors, and only 3% said it never will be.