David Swensen, the long-time manager of Yale University’s endowment and an iconic and influential figure in the investment world, recently pulled no punches in slamming hedge funds of funds, claiming among other things, they “are a cancer on the institutional investor world”.

It cannot be funds of funds per se to which Mr Swensen objects. He runs one. A large endowment like Yale maintains a sizeable professional staff to research, vet, select and monitor the endowment’s investment in a number of hedge funds comparable to a FoHF portfolio. Yale reportedly is unusually successful in demanding transparency, negotiating fees and selecting managers. It does so while incurring relatively low expenses at the university level. That Yale does so well is an argument for FoHFs. Even conceding few, if any, FoHFs may have Yale’s advantages of size, access and flexibility, this does not signify the risk return characteristics of many investors’ portfolios cannot be improved through investments in well-designed and managed FoHFs.