The HFRI fund of hedge funds index lost 20% over 2008, while the average hedge fund in HFR’s database lost 18%. The argument that a fund of hedge funds can spread risk and so is less likely to lose money than an individual fund is emerging as nothing more than wishful thinking. Indeed other than in 2007, the HFR fund of hedge funds index has returned less than the average hedge fund in a profitable year, and lost more in down years. By the end of the fourth quarter of 2008, fund of hedge...
