The world’s leading hedge funds managers are more concerned about attracting and retaining talented people and managing growth than anything else, according to new research published today by Ernst & Young.

“Governance and infrastructure are the top enablers for hedge fund growth, as the industry continues to mature and develop,” says Leon Chin, partner in the Ernst & Young Toronto hedge funds practice. “For Canadian hedge fund managers, this research explores key global industry issues that affect them.”

The poll of over 100 top global hedge funds (and fund of funds) managers, collectively managing some US$900 billion in assets, shows that retaining the right people (42%) and managing growth (39%) are the highest level challenges over the next year, compared to just 9% who anticipate investing or developing in new products. Respondents were principals, chief operating officers and chief financial officers at these funds.

Art Tully, co-leader of the global hedge funds practice at Ernst & Young, says: “The global hedge fund industry now manages US$2.5 trillion of assets; US$41.1 billion poured in from investors in the second quarter of 2007 alone. The industry appears to be proving that it can handle such inflows. The ability to absorb such flows is only tested by the capacity to grow and retain talent.

“Our survey demonstrates that managers are rethinking their infrastructure and operations to cope, not only to ensure scalability but, more importantly, to minimize any drag on performance. This is an evolutionary development for funds. To this extent we agree with industry commentators who say that funds are moving from institutionalization to ‘industrialization’, morphing into more typical asset manager-type structures.”

The survey noted a new confidence among hedge fund managers. Thirty-seven percent of respondents are confident that their operations meet the needs of their investor base and don’t see a need to change in the next two years. In addition, 21% say that they are likely to be able to offer products suitable for retail investors in the next two years, demonstrating a new confidence for the industry.