Fitch Ratings has warned that second thoughts from recent fund of hedge fund investors could potentially see $50bn (£26bn, €32bn) pulled from the hedge fund industry, laying bare liquidity mismatches that have been growing for the past three years.

As institutional investors have moved to take advantage of the asset class’s record of capital preservation since the rout of the dotcom crash, funds of funds’ share of global assets in hedge funds has rocketed from 10 per cent in 2002 to more than 50 per cent today, making the entire sector hugely sensitive to fund of funds investor sentiment.