As the numbers of hedge funds on offer increases, the lines between hedge funds and traditional asset managers are fading, and more traditional managers are establishing a presence in the market, according to Mercer Investment Consulting’s latest hedge fund newsletter.

Continuing a decade-long trend, Mercer says the hedge fund industry grew in size and prominence throughout 2004. There are now between 7,000 and 8,000 hedge funds available, representing nearly US$1 trillion in assets under management worldwide.

The growth has prompted new regulations and increased scrutiny, Mercer says. For instance, the Securities and Exchange Commission (SEC) late last year ...