Different market conditions favour different strategies and the performance of funds can vary widely depending on their approach.

The construction of any successful fund of hedge funds product is therefore highly dependent upon the skill of the investment manager.

In order to spread the risk, diligent portfolio construction remains a key requirement for success. The strategies employed by a fund of hedge funds portfolio should exhibit low correlation with each other and seek to exploit different market inefficiencies as some strategies may outperform others over a given time period.