Funds of hedge funds will continue to function as an integral part of hedge fund investing, FINalternatives reports.

While many investors can and have chosen to bypass FoF structures in order to invest “direct,” for the past 10 years assets under management under the FoF structure grew faster than AUM for all hedge funds combined.

The reasons for this impressive growth are obvious. FoFs provide diversity among managers, reduce risk and hold out the promise of net returns higher than the average hedge fund. The long list of casualties in the hedge fund industry and recent high profile hedge fund losses has also driven investors toward the security provided by a FoF.

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