Prominent funds of hedge funds face a cut of up to one-third in earnings from fees as losses they made last year lead investors to question their worth.

Debate about fees was stoked by funds of funds' lacklustre performance last year, said Huw van Steenis, head of the European banks and financials research at Morgan Stanley. They lost about 21%, outpacing hedge funds' 19% fall, according to analysts Hedge Fund Research.