Funds of funds shrink by 30%, but the multi-manager model will survive

Thu Apr 23, 2009



Niki Natarajan, editor, InvestHedge

Funds of funds faced their day of reckoning in 2008. The performance freefall, liquidity drought, global deleveraging and collapse of the global banking system, followed by a mass uncovering of fraud, stacked up to make 2008 the worst year so far for the fund of funds industry, which closed the year with returns of -16.63%.

Each year since the InvestHedge Billion Dollar Club survey started, the assets and number of firms with more than $1 billion have grown. For the first time since 2002, the fund of hedge funds industry has shrunk – by nearly 30% – losing more than $300 billion through performance erosion and outflow to sink to $744 billion by the end of 2008.

The industry has gone back to its former size as at June 2006. For most of the year, the largest problem facing both hedge funds and funds of...

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