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Some firms continued to rebuild after 2008, while those that had avoided serious liquidity and fraud issues were free to exploit the rich opportunities in the markets, especially in the credit and distressed areas.

The largest funds of funds – those with more than $1 billion in assets under management – now control a combined amount of $625 billion in assets, according to the 2009 asset flow survey carried out by InvestHedge, the leading publication about investors in hedge funds.

“Strong performance is helping to drive a recovery but it’s also interesting to see this being complemented by a reversal in asset flows. Fund of hedge funds assets declined by $95 billion in the first half of 2009, but by the year end this had reduced to $72 billion,” said Niki Natarajan, editor of InvestHedge.

“For the first time since InvestHedge was launched in 2002, the firms that have seen strong organic asset growth are also the ones that have had solid performance in 2009. It seems that common sense has returned to fund of funds investing, for now at least.”

There are now 114 fund of hedge funds management companies in the InvestHedge Billion Dollar Club, compared to 151 two years ago. Some 24 groups fell out of the rankings last year, as a result of them either shutting their businesses or their assets falling below the $1 billion level.

UBS Global Asset Management A&Q, with total assets of nearly $30 billion, retains the top slot in the industry. But Blackstone Alternative Asset Management is now the largest independent discretionary fund of funds group in the world, with $27.1 billion in assets. Blackstone moved up from third to second place in the 2009 survey.

Union Bancaire Privée, which in June 2008 was briefly the largest fund of funds firm in the world, has toppled to seventh place with $18.8 billion in total assets. HSBC Alternative Investments is in third place with $23.3 billion under management and Grosvenor Capital Management fourth with $22.5 billion.

The rebranded Man Investments, which was in second place for the mid year survey, now sits 9th in the rankings with $17.1 billion. Corporate website: www.hedgefundintelligence.com

- FG