III. Industry Analysis
Demand for the Hedge Fund industry’s services is determined by the success of the industry, the level of general economic activity, financial market conditions and larger demographic trends. As the level of investor uncertainty declines, higher investor risk tolerance increases demand for alternative asset vehicles, which tend to be riskier than traditional investments. Further, pension funds and other institutional investors frequently buy alternative investments as they seek out high returns.
Over the next five years, an increasing number of IPOs is expected to ensure higher demand for the Hedge Fund industry, as these companies require investors. Further, as the S&P 500 is forecast to perform strongly, demand for hedge fund will increase in kind.