Blake Grossman, chief executive of Barclays Global Investors, the world’s biggest money manager, has told the Financial Times that the disti...

Blake Grossman, chief executive of Barclays Global Investors, the world’s biggest money manager, has told the Financial Times that the distinction between hedge funds and mainstream asset management has become increasingly “arbitrary” as the two industries converge. “The notion that there is a traditional way of investing that is long only, and then there is hedge funds, is crazy. We’re seeing real convergence. “We’re getting mandates to employ some degree of short-selling, some degree of derivatives ... If you look out five years, there will be much less of a divide between what’s considered a hedge fund and what’s considered a traditional strategy,” he told the FT in an interview. BGI has $1,600 billion under management, and is best known as a manager of passive and exchange-traded funds. But, according to the report, around $80 billion of BGI’s actively managed money has a fee structure similar to that of hedge funds, charging a performance fee of 20 per cent. Mr Grossman told the FT: “What’s going to happen with hedge funds is there will be more pressure to justify the fees. Provided there’s real alpha, we don’t see pressure out there on the fee structure ... are there too many hedge funds out there? Certainly. You don’t need 6,000 hedge funds. There aren’t 6,000 really smart 27-year-olds. “The arbitrary divide that is in the market now between traditional strategies and hedge fund strategies, is absolutely arbitrary,” he said.