Failed case in FOF

The future of Duff Capital Advisors, a hedge fund launched by former Morgan Stanley CFO Phil Duff, has been cast in doubt after the firm slashed staff even before it began to raise capital to make investments.

Duff has had hedge-fund success in the past. He co-founded hedge fund FrontPoint Partners, which was sold to Morgan Stanley about three years ago. FrontPoint Partners LLC is not a typical hedge fund, but a platform that recruits and sets up hedge fund managers who run their own portfolios under the FrontPoint umbrella. The firm finds capital for new funds and performs back-office, risk control and other services, leaving the managers to focus on investing. Independent funds affiliated with FrontPoint market themselves under its umbrella and use it for back-office and marketing support. Philip Duff worked as a consultant to MS, he started Duff Capital this March, which has similar model to FrontPoint.

Duff, which at its peak employed 100 people, cut nearly 80 percent of its workforce last month, just nine months after opening its doors with some $500 million in seed funding from asset-management firm Lindsay Goldberg founders Robert Lindsay and Alan Goldberg.
According to insiders, Duff's expenses in building out his hedge fund have raised eyebrows and have caused a rift between Duff and Lindsay Goldberg.

This is the late example of the drawbacks of Fund of hedge funds. It’s believed in the hedge fund industry that FoF will be mostly hard hit amid this financial crisis. The cost of running a FoF is comparably high.

Sources said Duff last spring spent approximately $70 million hiring a posse of hedge-fund management teams as well as constructing new office space at 100 West Putnam Ave. in Greenwich, Conn., spurring insiders to criticize Duff for having spent too much money before his firm made even a single investment. In the future, I doubt if FOF model could have any chance to survive and prosper.