Here’s a question for you: What is the actual purpose of FoF ?
In theory, they are supposed to do the due diligence, the forensic accounting, the deep background checks that ordinary investors cannot.
Then once they identify a group of funds they want to allocate capital too, they are supposed to run the asset allocation (cash bonds stocks).
Beyond that, they should be diversifying across styles, strategies, cao sizes, geographic regions.
Additionally, they are also in charge of maintaining oversight of the funds — watch performance, style drift, etc.
Now ask yourself this: How many FoF actually do all that? How many FoF did that (competantly) for Madoffs.