"They have to look at where they are likely to get inflows in the coming year," S&P analyst Simon Scott said.
"Generally, institutions are the ones that are allocating to funds-to-funds at the moment, not retail [investors]."
The fund managers' retreat became clear when S&P approached them for its annual review of the alternatives sector.
As a result, the rating agency had to withdraw the ratings on six fund of hedge funds, including products of AMP, UBS and Invesco.
It also withdrew the ratings of three single alternatives funds.
"A lot of these funds are not closing, they are just refocusing on where they want to concentrate their efforts at the moment," Scott said.
He said there were good investments available in the alternatives sector, but retail investors were slower to recognise them than institutional investors.
"[Retail investors] might be a little reactionary in withdrawing capital from these funds," he said.
"They are on the lookout for a nice recovery."
S&P's annual sector review of alternative strategy funds will be concluded in September this year.
