Reconsidering Funds of Hedge Funds

Introduction

Chapter 1 After the Crisis: The Withering of the Funds of Hedge Funds Business?

R. McFall Lamm, Jr.

Abstract

The funds of hedge funds (FoFHs) business was robust and growing very rapidly prior to the financial market crisis in 2008, driven largely by the exceptional returns offered by hedge fund investing. However, the crisis had a profound impact on FoHFs as redemption suspensions by hedge fund managers essentially caused the industry to grind to a halt. Even after hedge funds began to return capital in 2009, FoHFs were overly cautious and carried too much cash exposure. Performance suffered accordingly and assets under management shrank precipitously. FoHFs did not share in the hedge fund industry rebound experienced post crisis ...