This left-for-dead hedge fund business is finally bigger than it was before the 2008 crash

• Hedge Fund Research said funds of hedge funds managed more than $800 billion at the end of 2025.
• That figure is the highest in history, topping the $799 billion figure from 2007.
• The financial crisis deeply hurt the fund-of-funds industry, and there are fewer operating now.

Funds that bet on hedge funds instead of stocks or bonds are finally in vogue again.

The double whammy of the financial crisis and Bernie Madoff's Ponzi scheme hit the fund-of-hedge-fund business so hard in 2008 that the industry is just now surpassing its 2007 asset level.

Data from Hedge Fund Research show that funds of hedge funds — which create portfolios of external hedge funds — now manage $818 billion, as of the end of 2025. It's the highest figure on record for the longtime industry tracker and the first time the industry has surpassed its onetime high-water mark of $799 billion in assets, which it ended 2007 with.

The surge in assets comes on the back of strong industry performance, with the average fund of funds returning 10.4% last year, the highest since 2009, according to Ken Heinz, president of Chicago-based Hedge Fund Research.

The asset growth can also be attributed to broader industry trends, Heinz said. Separately managed accounts, which give external fund investors more control over the managers they invest in, are now much more common. Firms like billionaire Izzy Englander's Millennium have increasingly used SMAs to access investing talent outside their walls. A With Intelligence report from last summer found that multistrategy funds have allocated to more than 100 external funds.

The greater insight granted to LPs via SMAs allows funds of funds to more closely monitor performance and risk metrics.

"Funds of funds have evolved," Heinz said.

The hedge fund industry overall has changed drastically compared to roughly two decades ago. Funds of funds and wealthy individuals' family offices used to account for a much larger share of hedge funds' overall assets. Still, the 2008 market crash forced many to liquidate their holdings, even if a fund had performed well.

This forced the hedge fund industry to turn elsewhere for capital, and now institutions such as pensions, endowments, sovereign wealth funds, and foundations make up the vast majority of the $5.2 trillion in assets in the space. This shift to a more institutional investor base is why hedge fund assets have soared over the past 18 years, while funds of funds have slowly inched up.

But the diversification offered by funds of funds is still sought out, as evidenced by the surge in investor interest in multistrategy hedge funds, particularly the biggest players like Millennium, Citadel, Point72, and Balyasny. Heinz expects that this interest has helped the fund-of-funds space in recent years and will continue to pump up assets as the biggest players fill up.

"Some of the larger multimanager programs are not always open or have a very high minimum," he said.

Still, there are other ways in which "the broad exodus" from the space in 2008 is being felt. In 2007, there were nearly 2,500 funds of hedge funds, according to Hedge Fund Research. At the end of 2025, there were fewer than 1,000.