Assets invested in hedge funds of funds declined 20.4%, or $233 billion, to $910 billion in the five years ended March 31, according to analysis from database provider eVestment Alliance.
The decline in hedge funds-of-funds assets was even steeper — down 36% — from the industry's peak of $1.421 trillion at the end of the second quarter 2008.
By contrast, hedge funds-of-funds assets were up $19.8 billion for the quarter ended March 31 despite net outflows of $7.3 billion, due “primarily to performance gains,” eVestment Alliance's report said.
Net inflows into single and multistrategy hedge funds totaled $31.4 billion in the first quarter.
eVestment's analysis also showed that investors redeemed $42 billion from hedge funds of funds in the six months ended March 31, compared to an inflow of $8.7 billion into single and multistrategy hedge funds.
“Funds of hedge funds have historically been the primary investors in hedge funds and in many cases, supported growth of assets among small and medium-sized hedge funds,” but that has changed, the report noted.
The percentage of assets invested in hedge funds by funds of funds dropped to 36% at the end of the first quarter, compared to 38% as of March 31, 2011, and 49% as of March 31, 2009, eVestment Alliance researchers reported.