Allocators say they will allocate to hedge funds again, but only to those that meet strict criteria.
"I think it would be wrong to think the hedge fund community will turn its back on the private investor community. This community founded them and continues to seed them.
"Start-up funds will continue to attract individual investors who are prepared to look beyond the new and much more rigid suitability thresholds of the institutional investors, of track record and longevity."
Private bankers looking at hedge strategies today focus more on regulated versions of them than on offshore funds.
The interested bankers have a different set of demands that managers must satisfy in onshore vehicles - compared to pre-crisis - before a manager can win private banks' cash.
Demands largely involve compliance to regulation, liquidity terms and independent service provision.
Dovey says: "For many HNWIs and UHNWIs [ultra high-net-worth individuals], the concept of gating and side-pockets was a wholly new experience.
In some cases, arguably, this was even beyond the small print of many investor agreements.
"What was clear, however, was the situation was brutal for all parties - the managers had to state bluntly that, if they were forced into full redemption mode, not only would many of them fail, but there would be little recourse for the end-investors. It was a marriage of inconvenience for both sides."
The hedge industry, including funds of funds, has much trust to win back from private banks.
Charles Henry Monchau, head of discretionary asset management at Switzerland's EFG Asset Management, says:
"Before the crisis, funds of hedge funds were favoured in the discretionary portfolios that comply with the Swiss Banking Association directives. But we are now less inclined to invest into them.
"A vast majority failed to de-correlate from global markets during the crisis, while some were not able to meet redemptions in full, or on time. Moreover, their returns have been sub-par during the 2009-10 recovery.
"Their privileged access to managers now seems less compelling as industry outflows prompted some of the best known managers to re-open their funds to investment.
"Finally, they have not been able to attract new investors since the crisis, and many do not have critical mass anymore."
Markus Taubert, head of private banking and chief investment officer at Germany's Berenberg Bank, says many strategies simply failed to fulfill the performance aspirations they set for themselves, and swore to investors they would achieve.
"Numerous strategies have not delivered on their performance, especially downside protection that they promised to offer investors. Also, even semi-liquid strategies could become completely illiquid," he says.
The subsequent pulling of client money by private banks during the crisis was quick and painful.
Retail investors, including HNWIs, made 80% of all redemptions from 2008 to March 2009, according to BNY Mellon.
While the industry had recovered to its pre-crisis size by December, a survey by Eurekahedge of nearly 200 Geneva-based funds of funds (allocators with coffers largely filled by private banks and family offices) recorded a slump of about 60%, to $14.8bn, between Madoff's arrest in December 2008 and October 2010.
Berenberg "hardly ever" recommends offshore hedge funds, but might consider versions regulated onshore.