Hedge funds are developing into a formidable competitor to mutual funds, as brokers, pension funds and insurance companies join the high-net-worth investors who bankroll most funds. Even mutual fund companies and insurers have recently bought hedge fund companies.

In 2000, hedge funds had $344.5 billion in total assets under management, according to a Freeman & Co. study of the industry. By 2005, Freeman. estimates that hedge funds will manage $915 billion.

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