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From Kirsten Bischoff, Opalesque New York:

Fund of hedge funds bore the brunt of investor redemptions during the worst of the liquidity crisis. With business models that proved unable to withstand the liquidity mismatches between investors and underlying investments, many FoHFs were forced to gate assets, and investors (especially institutional sized investors) have punished them ever since, widely opting to invest directly into single manager funds.

But, don't count FoHF managers out quite yet. The single largest source of capital for hedge funds, (still representing 29% of hedge fund industry capital according to Hennessee Group Research), fund of funds have every intention of maintaining and even growing their market share. A new survey by Rothstein Kass has shown that FoHFs are aiming to win back investor confidence by combining increased transparency with structures focused on equalizing liquidity matches (lower fees in exchange for longer lockups), and many are reviewing service provider relationships in order to best position themselves to meet these changes.

47% of FoHF managers may change administrators The Rothstein Kass survey found that service providers are one of the first places FoHFs will look to improve their ability to provide institution-worthy services to investors. 47% of the managers surveyed will consider changing their administrator, 28% will consider changing their auditor or legal counsel, and 25% will consider cha......................

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