Funds of funds blighted by Madoff scandal?

The Financial Times suggests that the still-unfolding Bernard Madoff scandal represents a blight on the funds of hedge funds industry. "The industry, which hardly existed two decades ago but today handles 45 percent of all hedge fund assets, has moved from hilltop retreat to dog house."

The thinking is that the likes of the Fairfield Greenwich Group and others that placed money with Madoff were essentially funds of funds and that they have tainted all. Another way of looking at them, however, is that they were simply middlemen who existed solely to generate fresh funds for Madoff. That said, the funds of funds industry faces some big challenges, and it's fair to say that investors will expect heightened due diligence in return for their 1 and 10.

For more:
- here's the FT article

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