When one of the world’s best-regarded investors describes your activities as a pernicious disease, it is time to reconsider what you have been doing.

In the case of funds of hedge funds, which were described as "a cancer" last week by Yale University endowment chief investment officer David Swensen, such reflection is overdue. The business, which is supposed to select the best managers in the hedge fund industry and construct portfolios that optimise their combined performance, generated a net loss of 20% last year, 1.7 percentage points lower than the hedge fund industry itself.