SSARIS' Rosenberg sees hedging growth

NEW YORK (Reuters) - The use of techniques employed by hedge funds will become widespread in the money management world in coming years, a veteran hedge fund manager told the Reuters Hedge Funds and Private Equity Summit on Wednesday.

Mark Rosenberg, chairman and chief executive of the $1 billion SSARIS Advisors LLC hedge fund firm, predicted that techniques such as short selling, leverage and advanced risk control will be used by a majority of institutional money managers within 10 years.

"It will become a mainstream investment," Rosenberg said at the New York forum, which has drawn more than a dozen speakers from the alternative investment world including hedge funds, buyout firms and venture capital. "In the next 10 years, the majority of (money) managers will be hedge fund managers."

Most institutional money managers now focus on buying and holding securities, in "long only" strategies. But Rosenberg, whose firm is majority-held by asset management giant State Street Corp. (STT.N: Quote, Profile, Research, Stock Buzz), said managers are under increased pressure to deliver "alpha," or above-market returns, which will drive demand for "absolute return strategies," or returns with less correlation to market returns.

Rosenberg's comments come as more mutual funds are developing new products to boost their returns, including the use of short-selling and leverage, which are widely used by hedge funds. Rosenberg said it is logical for the trend to continue.

Funds spend a great deal of time researching investments, he noted. Instead of choosing to buy or not to buy a stock, bond, currency or other security, funds should consider using the research to short those investments they think will decline in value as a "hedge" against those they think will rise, he said.

Rosenberg said the in-house use of hedging techniques will likely put pressure on hedge fund-of-funds, which offer access to the hedge fund world by marketing their knowledge of the sector.

And hedge fund of funds will face stiffer competition from multi-strategy hedge funds, which offer the diversity of hedge fund strategies under one umbrella, he said.

But those fund of funds that have a distinct investment style and advanced expertise in hedge funds should survive what is expected to be a shakeout among "plain vanilla" hedge fund of funds, he said.  Continued...