In a world in which the Chief Risk Officer of the formerly free capital markets, Ben Bernanke, has made any downside hedges obsolete (and as a result hedge funds have posted 5 years of returns without outperforming the S&P500), the first casualty has emerged: fund of funds. These parasitic, fee-soaking institutions, which merely collect a fee on top of the fees already charged by hedge funds, are rapidly on their way to extinction as the following charts from Eurekahedge prove conclusively. Naturally, the FOF industry which generates massive fees for its "value adding" managers, will not go down without a fight. And as Pensions and Investment reports, the FOFs have found a way to strike back: convert hedge funds into long only, idiot money, and we do enjoy the irony that in this centrally-planned market the idiot money is outperforming the smart, nimble asset managers by orders of magnitude.
Pop quiz: What is the common theme among the following "best of breed" 2 and 20 (at least) hedge funds, whose YTD performance is presented below?