Funds Of Funds Losing Investors Even As Industry Grows

Dec 16 2009 | 12:58pm ET

Hedge fund assets under management may be rising, but it’s not thanks to the funds of hedge funds.

Investors have pulled more than one-quarter of their assets from funds of funds this year, according to Eurekahedge. The $164 billion in net redemptions suffered through the first 11 months of this year makes 2009 an even worse year for funds of funds than last year.

Fund of hedge funds now manage just $440 billion, down from $823 billion just 18 months ago. Worse still for that industry, its underperformance relative to overall hedge fund performance is growing: Hedge funds have returned nearly 20% this year; funds of funds are up about half that.

The huge loss of assets has not exactly led to a mass die-off of funds of funds, however. According to Eurekahedge, their number has fallen by only 15% over the past two years, to 3,110.

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