Hedge funds' interest in outsourcing has historically been confined to the opportunities they spot in companies that reduce costs by hiring staff in India, China and other points offshore. But more of those outsourced jobs could soon be in the hedge fund sector itself.

There is no question that outsourcing in general is a hot topic. What began as a trickle in the early 1990s has become a torrent as manufacturing has moved to China and service functions have been relocated to India. A recent report by Indian trade group Nasscom in conjunction with McKinsey & Co estimated outsourcing jobs could employ as many as 1m people in India by 2008, increasing at a compound annual growth rate of about 45 per cent.