It has not been a good stretch for funds of hedge funds. According to the InvestHedge Billion Dollar Club survey, these funds of funds lost almost 30 percent of assets under management in 2008, and the industry dipped below the $1 trillion mark. That said, the industry is not on the brink of extinction.

FINalternatives notes that in one view this sort of a shakeout is necessary every now and then. The big players will retrench and then perhaps find themselves in a more dominant position than before, as the barriers to entry across the industry have been pushed higher. The largest funds of funds may surprise you: UBS Global Asset Management A&Q, Union Bancaire Privée, HSBC Alternative Investments, Permal Investment Management and Blackstone Alternative Asset Management. 

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