Niki Natarajan, editor,
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...