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Finale for funds of funds

Date: Wednesday, February 13, 2013
Author: Michelle Celarier, New York Post

The death march of the funds-of-funds industry continues.

Funds of funds — vehicles that pool money to invest in a diverse basket of hedge funds — declined by $44.3 billion in 2012 to end the year with $501 billion. They have been on a downward slide since 2008, when they had $804 billion, according to Trim Tabs Investment Research.

In 2009, some $148 billion fled the industry after it lost client money and got caught up investing in Bernie Madoff’s Ponzi scheme.

“The trend is accelerating,” said Trim Tabs analyst Leon Mirochnik.

Funds of funds typically underperform hedge funds, as they charge an extra level of fees. Last year they gained 4.5 percent, compared with 8.5 percent for hedge funds. The underperformance was “above and beyond their fees,” said Mirochnik.