The dramatic increase in global interest rates over the past 18 months has prompted hedge fund investors to warn managers that they face an increased risk of redemptions and pressure to cut fees unless they can improve their performance, according to a report by The Financial Times.

Programmes of aggressive rate hikes by several major central banks in a bid to tackle inflation, mean that investors such as pension funds can now achieve improved returns while keeping risk low, with some developed market government bonds offering yields of 5% or more.

According to the FT, some hedge fund investors are now indicating that managers need to boost their returns by a similar amount to the move in global borrowing rates, which in the case of the US dollar is over 5% since last year, or face significant outflows.