Global Hedge Fund Assets Will Reach $2.6 Trillion by 2013, According to New Study...

Global Hedge Fund Assets Will Reach $2.6 Trillion by 2013, According to New
Study by The Bank of New York Mellon and Casey Quirk

Report sees fundamental change in hedge fund operating models; Greater
reliance on third parties to satisfy liquidity, transparency and regulatory
demands

LONDON and NEW YORK, April 20 /PRNewswire-FirstCall/ -- Hedge fund assets will
bottom out at roughly $1 trillion in 2009, after which capital appreciation
and $800 billion in net inflows over the next four years will push global
levels to $2.6 trillion by 2013, according to a new study of institutional
investors, investment consultants and hedge funds released today by The Bank
of New York Mellon (NYSE: BK) and Casey, Quirk & Associates.

The study, entitled "The Hedge Fund of Tomorrow: Building an Enduring Firm,"
found that institutions remain firmly committed to hedge fund investing.
Institutional investors comprised less than 20% of hedge fund redemptions in
2008-2009, and North American pension plans will represent the single largest
source of new capital between 2010 and 2013, followed by British and Northern
European institutions. Global high net worth investors could account for as
much as 60% of new net flows between 2010 and 2013, although their return to
hedge fund strategies will rely on capital market conditions and hedge fund
performance.

Funds of hedge funds will solidify their role as the primary hedge fund
distribution channel, capturing almost 60% of net inflows between 2010 and
2013 by continuing to offer services most investors will find difficult to
replicate on their own, such as manager-sourcing and ongoing due diligence.

According to the report, the hedge fund industry is facing a "transformational
crisis" and must address key shortcomings in its business and operating
models. As a result, hedge funds will rely more on third parties for a
growing range of administrative support. Fund administrators will play a
greater role in hedge funds' operations, which will require stronger
integration of hedge fund servicing activity with traditional custody and cash
platforms.

"The events of 2008 have changed the old dynamic. Investor and regulatory
demands for new levels of transparency mean the legacy operating model no
longer works," said Brian Ruane, executive vice president of Alternative
Investment Services at The Bank of New York Mellon. "Hedge funds increasingly
will turn to independent third parties for middle- and back-office functions
such as portfolio accounting and reconciliation, custody of non-collateral
assets, pricing and valuation, cash management, and counter-party
risk-mitigation. Allowing third parties to play a bigger role in their
business will be a sign the hedge fund industry is maturing."

"Enduring hedge fund management firms will more closely align their business
models with investor needs for transparency and liquidity. This means new fee
models and longer-term incentive structures," said Kevin Quirk, a partner with
Casey Quirk. "By striking better-designed balances, they will come to define
the central value proposition of active asset management."

While the single-strategy boutique remains a viable model, better-designed and
more durable investment management businesses will capture a majority of new
hedge fund assets. Four models likely to thrive in the coming years include:

-- Single-Strategy Boutique: 'Classic' hedge fund, dominated by
a typical direct investment capability using hedge fund techniques
-- Multi-Capability Platform: Common brand, distribution and business
infrastructure support multiple distinct alternative investment
capabilities
-- Merchant Bank Alternative Manager: Diversified financial
intermediation
business with core capabilities in investment management

-- Converged Traditional-Alternative Manager: Investment firm that has
successfully integrated alternative and traditional long-only
capabilities

Results from this year's study, the third in an ongoing series jointly created
by the Bank of New York Mellon and Casey Quirk, relied on interviews with more
than 150 institutional investors, investment consultants, hedge funds, funds
of hedge funds, and industry experts around the world.

Casey Quirk provides management consulting services exclusively to investment
management firms. The firm specializes in developing business strategy and
planning, enhancing investment practices, and crafting distribution policies.
Casey Quirk draws on more than 35 years of experience in delivering value to
its clients and partners through a unique combination of deep industry
knowledge and experience, solutions-oriented thought leadership, and a proven
ability to create change within organizations. Additional information is
available at www.caseyquirk.com.

The Bank of New York Mellon Corporation is a global financial services company
focused on helping clients manage and service their financial assets,
operating in 34 countries and serving more than 100 markets. The company is a
leading provider of financial services for institutions, corporations and
high-net-worth individuals, providing superior asset management and wealth
management, asset servicing, issuer services, clearing services and treasury
services through a worldwide client-focused team. It has $20.2 trillion in
assets under custody and administration, $928 billion in assets under
management, services more than $11 trillion in outstanding debt, and processes
global payments averaging $1.8 trillion per day. Additional information is
available at www.bnymellon.com.

SOURCE The Bank of New York Mellon Corporation

Joseph F. Ailinger Jr., +1-617-722-7571, joe.ailinger@bnymellon.com, or Serra
Balls, +44-0-207-964-8798, serra.balls@bnymellon.com, or Ben Phillips,
+1-917-476-2140, b.phillips@caseyquirk.com