Hedge funds to top $100 billion

A new wave of financial innovation should see the Australian hedge fund industry pass $100 billion, says the Alternative Investment Management Association (AIMA).

The Australian hedge fund industry is expected to increase its current assets under management from $96.9 billion to over $100 billion, according to ASIC data, said AIMA chairman Paul Chadwick.

"We're at an inflection point where subdued equity and debt markets are setting an extremely positive backdrop for hedge funds to become the fastest-growing segment of the Australian investment management market," Mr Chadwick said.

"With innovative strategies coming to market, from alternative beta to strategies that target the capital lending functions once dominated by banks, we expect the number and types of hedge fund strategies to grow significantly," he said.

ASIC data indicates that the hedge fund industry grew by 45 per cent between 2012 and 2014. In 2014, hedge funds reported average annual returns of 15.6 per cent.

AIMA chief executive Jack Inglis said the industry's growth reflects the "depth of hedge fund talent, tenacity and investor engagement".

He pointed out that since the establishment of the Investment Manager Regime (IMR) earlier in the year, international hedge fund management firms have considered entering the Australian market.

The IMR – a part of Australia's taxation legislation – has provided clarity to international companies looking to invest in Australia, he said.

"We look forward to representing an increasingly diverse, dynamic and thriving hedge fund community in Australia and to working with regulators and industry leaders to ensure this community can achieve its full potential for investors," said Mr Inglis.

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