Tanya Styblo Beder, the head of Citigroup's hedge fund unit, is looking into the future of hedge funds, and her predictions are not too pretty.

She predicts that the total amount of hedge funds will decrease from 8,000 to 5,000 over the next five years due to the fact that there will be smaller returns and higher cost demands.

"Such a decrease will stem from rising cost structures as you will need a lot of scale to survive," she said, according to Offshore.com.

 She believes that the hedge fund world will experience a ripple effect between large players and smaller ones.

"The nature of market trends is changing, and it will become increasingly difficult to survive," she said.

The nature of the market is changing because hedge fund managers are all chasing the same strategies, making the market more volatile and tougher to make a profit from.

"I don't think the party is over. I just don't believe that there will be markets with very high returns for long," she said.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.