Fund of Funds Investing: A Roadmap to Portfolio Diversification

Chapter 15. Conclusion

If you were not hiding under a rock, living in a cave, or staying on a island 300 miles west of Fiji during 2008 and early 2009, you probably believed that the hedge fund industry, the fund of funds industry, and Wall Street for that matter were all coming to end. That was the tone found in every article, news bulletin, and segment in the popular press. It seemed that without a doubt, the end was near or maybe even upon us. The collapse of Lehman and the fire sales of Bear Stearns and Merrill Lynch as well as the hundreds if not thousands of hedge funds that closed or went out of business have sent shockwaves through the system during this time. These actions have caused many to literally scratch their heads, wondering what, if any, future was left? Most were feeling this way even before the revelation about Madoff, which has only added more fuel to the fire and left many scared and frightened and asking why—and what comes next.

WHAT WE CAN AGREE ON

On more than one occasion in late 2007 and early 2008, the authors both agreed that there would always be a Bear Stearns. On more then one occasion in 2008, we both agreed that Lehman would be sold and would not go bankrupt, and on December 11, 2008, we both agreed that there was no excuse for being taken in by Madoff except for lack of due diligence and laziness. We were right about one of three.

Even with all of the aforesaid, the collapse of the banks along with Fannie Mae and Freddie Mac, the bailout of the auto ...