Hedge Funds-of-Funds Lose 30% of Assets in 2008

After reaching a peak of $1 trillion last June, hedge funds-of-funds took in $300 billion in redemptions, or a 30% decline, Investhedge said. Today, hedge funds-of-funds have $744 billion in assets.

“The industry has taken a serious beating, but it is not an industry that is on the brink of extinction,” said Investhedge principal Niki Natarajan. “What has happened is that the barriers to entry have finally gone up, and only those that are serious representatives of the funds-of-funds industry will win institutional money.”

The biggest hedge fund-of-fund manager is UBS Global Asset Management, with $34 billion. Another giant is Man Group, with $19.3 billion in assets under management.

Hedge funds-of-funds’ reputations were seriously damaged last year when it became apparent that many of the clients of disgraced money manager Bernard Madoff were hedge funds-of-funds.