US institutional investors, mostly pension funds, could pour $250bn into hedge funds in the next four years, and by 2008 could account for half of all hedge fund inflows in a trend that would transform the fledgling industry.

About 400 US institutions had $66bn invested in hedge funds by the end of 2003, with half of that from endowments and foundations, according to a study by the Bank of New York and consultancy Casey, Quirk & Acito, to be released on Monday. That invested capital would rise to more than $300bn by 2008, as pension funds, especially defined benefit plans, flocked to the sector, the study said.