Funds of Hedge Funds Surpass Pre-2008 Asset Levels

The industry that struggled after the financial crisis and Madoff scandal is now bigger than it was before the 2008 crash.

Published on Feb. 18, 2026

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Funds of hedge funds, which create portfolios of external hedge funds, have finally surpassed their pre-2008 asset levels, reaching a record $818 billion in assets under management as of the end of 2025. The industry's resurgence is attributed to strong performance, with the average fund of funds returning 10.4% in 2025, as well as broader industry trends like the rise of separately managed accounts that give investors more control over the managers they invest in.

Why it matters

The recovery of the funds of hedge funds industry is significant as it was hit hard by the 2008 financial crisis and the Bernie Madoff scandal. The industry's ability to bounce back and surpass its previous asset high-water mark suggests a renewed investor appetite for the diversification and risk management that funds of funds can provide.

The details

Data from Hedge Fund Research shows that funds of hedge funds, which create portfolios of external hedge funds, now manage $818 billion, the highest figure on record for the industry tracker. This surpasses the previous high of $799 billion in assets at the end of 2007. The surge in assets is attributed to strong industry performance, with the average fund of funds returning 10.4% in 2025, the highest since 2009. The growth is also due to broader industry trends, such as the rise of separately managed accounts that give investors more control over the managers they invest in.

  • Funds of hedge funds managed $799 billion in assets at the end of 2007.
  • As of the end of 2025, funds of hedge funds managed a record $818 billion in assets.

The players

Hedge Fund Research

A Chicago-based firm that tracks the hedge fund industry.

Ken Heinz

President of Hedge Fund Research.

Izzy Englander

Billionaire founder of Millennium, a prominent hedge fund firm.

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What they’re saying

“Funds of funds have evolved.”

— Ken Heinz, President, Hedge Fund Research

The takeaway

The resurgence of the funds of hedge funds industry, which struggled in the aftermath of the 2008 financial crisis and Madoff scandal, demonstrates the continued investor demand for the diversification and risk management that these funds can provide. The industry's ability to surpass its previous asset high-water mark suggests it has adapted to the changing landscape of the broader hedge fund space.