'Hedge funds are the cottage industry of investment management.' So says Peter Chen, chief operating officer of Orthogonal Capital Management. But they won't be for much longer, he says. The field is now in the throes of its own kind of industrial revolution, moving into an era of 'mass production' that will bring these vehicles into the portfolios of most investors.

According to Sohail Jaffer, chairman of the Alternative Investment Management Association (Aima) in London, traditional long-only active fund managers such as Mercury, Schroders and Gartmore, are all launching long/short funds in preparation for this revolution. Indeed, hedge funds are now even beginning to have a place in a passive manager's stable.