He told a Wellington gathering yesterday that the proliferation of such funds has meant, “people like me have had to sharpen up our act.”

“In the past, if you had dropped 10% but the market had dropped 15% you would be slapping yourself on the back. That’s a lot less easy to do now.”

However he says there are still risks attached to hedge funds and there is now an issue of quality control in that part of the market.

“The quality of people going to hedge funds is not what it was five years ago. The older ones have become institutions, but the smaller, newer ones are basically attracting people who want to go into the casino and put their money on red six.”

In an overview of the global investment outlook, Walker says the main sources of concern remain the (deliberately engineered) China slowdown, the jobless United States recovery, and European growth, which he characterises as “anaemic”.

Higher oil prices, the continued uncertainty around Iraq and terrorism, along with central banks starting to move interest rates up and signs that firms are at the peak of their profit cycle are also worries.

There is also nervousness about the US presidential election, simply because the race is so close, he says. If it were clear one candidate or the other was going to win, the stock market would rise a few points, regardless of which candidate was in front.

Overall though, he is upbeat about the environment. Outside the US, markets are still generally undervalued: “There is little evidence that a significant downturn is imminent.”