Given Allen & Overy's (A&O's) wedlock to institutional clients there may be some who are cynical about its current push into the burgeoning hedge fund market.

However, A&O – a firm that has been criticised for failing to break into any market not directly involving a major investment bank – has, in recent years, put considerable effort into tapping this new wave of financiers.

The CV includes acting for the London operations of US hedge fund giants Och-Ziff and Perry Capital on their investment in the £404m management buy-out of The Peacock Group and advising Och-Ziff when it took a stake in Cadbury Schweppes last year.

With the firm's corporate team also clocking up instructions for the likes of Amaranth, Polygon, Citadel and Fortress, it is apparent that A&O's profile-raising 2004 role on the hedge fund-backed acquisition of Manchester United Football Club was more than a one-off.

Even more notable, from a debt perspective, was the recent role secured by US restructuring partner David Frauman for the bondholders in the mammoth Eurotunnel restructuring, hardly an obvious one for an insolvency team so closely associated with senior lenders.

Such roles are cited as the fruits of the recruitment several years back of Frauman and Kenneth Coleman from Cadwalader Wickersham & Taft. This also paved the way for the creation of a cross-practice hedge funds team, which includes Frauman and Coleman, corporate restructuring heavyweight Carolyn Conner and Manchester United veteran Andrew Ballheimer and fellow corporate partner Jeremy Hunt.

Some rivals are yet to be impressed, with one veteran hedge fund specialist classing A&O alongside Latham & Watkins and Linklaters as firms that are making progress at the "outskirts" of the sector.

However, another high-profile City practitioner with a US firm cites A&O as the London practice most likely to make serious inroads with the new breed of hedge funds that are hunting beyond their traditional trading business to focus on M&A, distressed debt and leveraged finance.

The conflict issue, of course, looms given the bedrock of A&O's finance client base. Clearly, a dramatic move into the Bingham McCutchen/Cadwalader school of bondholder activism is not on the cards. One LBO partner comments with ample understatement: "We are not going to be in the business of suing banks."

And a more serious conflict threat could emerge should the hedge funds currently poking at the edges of the clubby leveraged finance market achieve something more substantive. So far, such roles have largely been confined to mezzanine finance or the secondary market, but at some point the lure of fat fees will surely prove too great to resist. That would require a debate within A&O, but the consensus is that the firm still has plenty of room to manoeuvre, particularly as its smallish private equity practice is unlikely to generate many conflicts from the sponsor side.

Given the slow progress A&O has faced in recent years in extending its practice beyond its finance heartlands, a well-cultivated hedge funds niche could be just what the doctor ordered.

As one partner comments: "Has it been easier because of our [smaller] private equity practice? It is possible. But I think we just had our heads up a little earlier than some."