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Under the current conditions of the financial markets, funds of private equity funds are attracting the attention of private equity firms for its distribution among their clients. These funds may be marketed to non-professional investors under certain legal requirements. This article analyzes the main features of this type of funds, from the regulatory and internal functioning perspectives, by identifying its main specificities in comparison with other private equity funds. Moreover, this article analyzes, from a tax perspective, the main aspects to take into account at the level of the funds of private equity funds and in relation to the income received by its investors. [ABSTRACT FROM AUTHOR]

The article offers information about the performance of private equity funds which is supposed to be affected by underperformance, ineffective marketing and unjustifiable fees. It cites the reference of an analysis made by the consultant TorreyCove Capital Partners LLC as per which funds of private equity funds have led to the underperformance of individual private equity funds. It informs about expected decline in the number of fund managers due to their inability to raise new funds.

The article reflects on the poor performance of hedge funds in the U.S. as it confirms an identity crisis for funds of funds. It mentions that funds of hedge funds (FOHFs) were the only way to gain access to the underlying hedge funds in the 1990s. It adds that FOHFs are now expected to excel in asset allocation, risk management, and maintaining relationships with managers.

The article offers information on the survey done by InvestHedge Billion Dollar Club which reveals that funds of hedge funds has lost almost 30 percent of assets under management in 2008 and the industry dipped below the 1 trillion dollar mark.

The article discusses a study updated on AllAboutAlpha.com site, which compares the stock mutual fund and hedge funds of funds of the U.S. The study found that funds of funds add value over and above the return an investor would get on buying a generic hedge fund composite index (the HFRI). Other topics include the financial crisis which make funds of hedge funds industry, the value-added delivered by funds of funds and strategic allocation of mutual funds.

The article reports on the impact of the financial crisis on hedge funds in the U.S.