Prequin, a research firm, has calculated that 58% of hedge fund managers worldwide expect regulation to damage the industry – up from 50% last year.

More than half of hedge fund managers (53%) and other associated industry figures that the research firm Preqin surveyed say that regulation is the biggest challenge they face and most of them expect 'red tape' to hamper the sector, although they do predict that assets will rise in 2015.

Preqin asked 160 hedge funds, investors and alternative investment consultants globally for their outlook for 2015 and, on the basis of their findings, believe that 58% of hedge fund managers expect regulation to damage the industry – up from 50% last year. Preqin stated that the increasing costs and complexity of running these businesses, combined with global regulatory uncertainty, has resulted in pessimism from fund managers regarding the impact regulation will have on the industry.

Preqin’s forecast follows recent steps by the Alternative Investment Management Association to highlight the hedge fund industry’s tax contribution and challenge assertions that the industry is exploiting loopholes.

In recent years the hedge fund industry, which Hedge Fund Research calculates to be worth $2.85 trillion, has had to contend with a raft of new rules such as the European Union's Alternative Investment Fund Managers Directive and with tighter oversight from the Securities and Exchange Commission in the US, among others. The continuing financial crisis that began in 2007-8 accounts for much of the increase, although the hedge fund industry says that it was not a prime cause of the market explosion of 2008.

Despite this, Preqin calculates that 80% of fund managers believe that assets under management will increase this year, while 58% of investors plan to increase and 26% plan to hold their hedge fund allocations. Some 63% of hedge fund managers have a positive outlook on the industry for 2015, despite Preqin’s industry benchmark posting its worst annual return since 2011. Performance remains a key concern for investors in the industry – as cited by 73% of hedge fund investment consultants and 33% of hedge fund investors.

All over the industry, fees remain a bone of contention. These have been affected by dissatisfaction with performance and recent announcements by pension funds that they are going to exit the space. With 68% of investors seeking improvements in management fees and 29% looking for greater 'transparency' in 2015, fund managers must be prepared to negotiate terms and conditions and reassess the alignment of interests between fund managers and investors, Preqin said.