New and innovative technology is being demanded by hedge funds and investment in IT is expected to reach $3.3 billion by 2009, according to a Datamonitor report.

"Hedge funds globally will look to use technology to improve execution capability in the front office as they seek competitive advantage," said Nii Barnor, financials services technology analyst with Datamonitor and author of the study. "In addition, service providers need to raise the bar too by offering enhanced reporting functionality and superior connectivity to clients."

As regulatory scrutiny increases, hedge funds are resembling traditional asset managers by placing cost control and efficiency higher in their priorities, Barnor said. Additionally, there will be opportunities for technology vendors to service providers such as prime brokers and fund administrators, as fund administrators begin to update their offerings.

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