The hedge fund industry is heading towards a consolidation where smaller money managers and funds of funds will soon be absorbed into hulking, multi-strategy advisers, according to a recent white paper from investment banker and Grail Partners founder Don Putnam.

Putnam, whose "Adapt or Die Trying: Darwinism and Intelligent Design in the Hedge Fund Industry" was recapped in a report this week from TheStreet.com, also contends that single strategy advisers are doomed and that wealthy investors will begin seeking boutique hedge funds in Europe. On the brighter side, Putnam thinks that pension allocations to hedge funds will increase by three-fold over the next five years and that IPOs will prosper.

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