In 2000 only 17% of the assets invested in hedge funds came via funds of funds, by 2007 this proportion had grown to over 40%, however by 2016 the proportion had again reduced significantly to 20%.

What factors explained the popularity of funds of funds and why did investors choose to invest via this route rather than directly in the individual underlying hedge funds despite the additional fees? What factors have driven the subsequent reduction in popularity of funds of funds?

Answer rating: 100% (QA)

The popularity of funds of funds in hedge fund investments and its subsequent reduction can be attributed to several factors 1 Initial Popularity Fact... View the full answer