According to research carried out by accountancy and auditing firm Rothstein Kass, 70 per cent of hedge funds believe 2010 will be seen as a "trying" year for the industry, with increased regulatory oversight on the horizon.
"It is no surprise that the outlook for 2010 echoes the concerns of 2009 rather than the unbridled optimism of years past and reflects a more conservative approach to the future," the report stated.
There is also expected to be greater competition to attract investors in the near future, reports Reuters.
Eight out of ten of the managers questioned believe new hedge funds will be launched this year â both by newcomers and companies attempting to add to their existing portfolios.
Last month, data from Hedge Fund Research revealed the industry had its worst month since November 2008 in May, as returns dropped by 2.26 per cent.
By Gary Cooper