A portfolio analyst is studying the history of hedge funds. While reviewing the milestones that shaped the hedge fund industry, the analyst focuses on institutional investors replacing private individuals as the dominant hedge fund investor group in the early 2000s. The analyst examines the effects of this major development on the industry, including changes in investor expectations, assets under management (AUM), and the level and volatility of returns. Which of the following statements is correct regarding the emergence of institutional investors as the dominant investor group in the hedge fund industry?