Fund of funds
Encyclopedia
A "fund of funds" is an investment strategy of holding a portfolio of other investment funds rather than investing directly in share
s, bond
s or other securities. This type of investing is often referred to as multi-manager investment
. A fund of funds may be 'fettered', meaning that it invests only in funds managed by the same investment company, or 'unfettered', meaning that it can invest in external funds.
There are different types of 'fund of funds', each investing in a different type of collective investment scheme
(typically one type per FoF), for example 'mutual fund
' FoF, hedge fund
FoF, private equity
FoF or investment trust
FoF.
. According to modern portfolio theory
, the benefit of diversification can be the reduction of volatility while maintaining average returns. However, this is countered by the increased fees paid on both the FoF level, and of the underlying investment fund.
An investment manager may actively manage with a view to select the best securities. A FoF manager will try to select the best performing funds to invest in based upon the managers past performance and other factors. If the FoF manager is skillful, this additional level of selection can provide greater stability and take on some of the risk relating to the decisions of a single manager. As in all other areas of investing, there are no guarantees for regular returns. As a fund of funds invests in the scheme of other funds, it provides a greater degree of diversification. Instead of investing in different stocks of mutual funds and keeping records of all of them, it is much easier to invest and track only one fund which in turn invests in other mutual funds.
s for Funds Of Funds are typically higher than those on traditional investment funds because they include the management fees charged by the underlying funds. As in the case of schemes of mutual funds, FOF schemes also work under the due diligence of a fund manager. This gives the scheme an additional expertise. It also helps to provide access to information which may be difficult to obtain information by an investor on a case by case basis. Every fund manager has a particular style of diversification. This diversification has a perfect correlation with the number of managers involved. Once a FOF reached a certain level of managers, adding more flattens return curve and diversifies away alpha (Harry Prasun Kat2).
Since a fund of funds buys many different funds which themselves invest in many different securities, it is possible for the fund of funds to own the same stock through several different funds and it can be difficult to keep track of the overall holdings.
Funds of funds are often used when investing in hedge fund
s and private equity fund
s, as they typically have a high minimum investment level compared to traditional investment funds which precludes many from investing directly. In addition hedge fund and private equity investing is more complicated and higher risk than traditional collective investments. The lack of accessibility favors a FoF with a professional manager and built-in spread of risk.
Pension funds and other institutions often invest in funds of hedge funds for part or all of their "alternative asset" programs, i.e. investments other than traditional stock and bond holdings.
After allocation of the two levels of fees payable and taxation, returns on FoF investments will generally be lower than single-manager funds.
The due diligence
and safety of investing in FoFs has come under question as a result of the Bernie Madoff scandal, where many FoFs put substantial investments into the scheme. It became clear that a motivation for this was the lack of fees by Madoff which gave the illusion that the FoF was performing well. The due diligence of the FoFs apparently did not include asking why Madoff was not making this charge for his services. 2008 and 2009 saw fund of funds take a battering from investors and the media on all fronts from the hollow promises made by over-eager marketers to the strength (or lack) of their due diligence processes to those carefully explained and eminently justifiable extra layers of fees, all reaching their zenith with the Bernie Madoff fiasco.
(formerly known as Private Equity Intelligence), in 2006 funds investing in other private equity fund
s (i.e., fund of funds, including secondary funds
) amounted to 14% of all committed capital in the private equity
market. The following ranking of private equity fund of fund investment managers is based on information published by Private Equity Intelligence
:
Source: Preqin (formerly known as Private Equity Intelligence)
According to 2011 Preqin Global Private Equity Report, largest firms by total fund of funds capital raised in the last 10 years ($bn) are:
Source: Preqin
s to provide broad exposure to the hedge fund industry and to diversify the risks associated with a single investment fund. Funds of hedge funds select hedge fund managers and construct portfolios based upon those selections. The fund of hedge funds is responsible for hiring and firing the managers in the fund. Some funds of hedge funds might have only one hedge fund in it, this lets ordinary investors into a highly-acclaimed fund, or many hedge funds.
Funds of hedge funds generally charge a fee for their services, always in addition to the hedge fund's management and performance fees, which can be 1.5% and 15-30%, respectively. Fees can reduce an investor's profits and potentially reduce the total return below what could be achieved through a less expensive mutual fund
or ETF
.
While funds of funds conceptually can provide extremely useful services for many hedge fund
investors, they have been criticised for the significant incremental costs they impose. (The underlying hedge funds usually charge fees of between 1 and 2% of assets managed and incentive fees of 15–25% of profits generated. The funds of funds typically add additional fees of 1% and 10%, respectively). Moreover, fund-of-funds behavior has often exhibited crowd-following tendencies, suggesting the managers of these funds prefer to match indices rather than seek opportunities.
The industry has recently been criticized by some hedge fund managers for a reputation of holding a short-term view. Some hedge funds have even started turning away fund of hedge funds money. “It is really beginning to irritate those funds of hedge funds that approach their investments sensibly,” says one fund of hedge funds manager.
The first fund of funds was started by the Rothschild family
in Europe in 1969 under the name Leveraged Capital Holdings. In 1971, Richard Elden founded Grosvenor Capital Management
in Chicago, Illinois, introducing the concept of fund of funds to the United States.
Share (finance)
A joint stock company divides its capital into units of equal denomination. Each unit is called a share. These units are offered for sale to raise capital. This is termed as issuing shares. A person who buys share/shares of the company is called a shareholder, and by acquiring share or shares in...
s, bond
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
s or other securities. This type of investing is often referred to as multi-manager investment
Multi-manager investment
Multi-manager investment is an investment product that consists of multiple specialized funds. Each specialized fund may invest across different sectors and markets, or having managers investing in the same asset class but have different investment styles...
. A fund of funds may be 'fettered', meaning that it invests only in funds managed by the same investment company, or 'unfettered', meaning that it can invest in external funds.
There are different types of 'fund of funds', each investing in a different type of collective investment scheme
Collective investment scheme
A collective investment scheme is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group...
(typically one type per FoF), for example 'mutual fund
Mutual fund
A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors to buy stocks, bonds, short-term money market instruments, and/or other securities.- Overview :...
' FoF, hedge fund
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
FoF, private equity
Private equity
Private equity, in finance, is an asset class consisting of equity securities in operating companies that are not publicly traded on a stock exchange....
FoF or investment trust
Investment trust
An Investment trust is a form of collective investment found mostly in the United Kingdom. Investment trusts are closed-end funds and are constituted as public limited companies....
FoF.
Features
Investing in a collective investment scheme may increase diversity compared to a small investor holding a smaller range of securities directly. Investing in a fund of funds may achieve greater diversificationDiversification (finance)
In finance, diversification means reducing risk by investing in a variety of assets. If the asset values do not move up and down in perfect synchrony, a diversified portfolio will have less risk than the weighted average risk of its constituent assets, and often less risk than the least risky of...
. According to modern portfolio theory
Modern portfolio theory
Modern portfolio theory is a theory of investment which attempts to maximize portfolio expected return for a given amount of portfolio risk, or equivalently minimize risk for a given level of expected return, by carefully choosing the proportions of various assets...
, the benefit of diversification can be the reduction of volatility while maintaining average returns. However, this is countered by the increased fees paid on both the FoF level, and of the underlying investment fund.
An investment manager may actively manage with a view to select the best securities. A FoF manager will try to select the best performing funds to invest in based upon the managers past performance and other factors. If the FoF manager is skillful, this additional level of selection can provide greater stability and take on some of the risk relating to the decisions of a single manager. As in all other areas of investing, there are no guarantees for regular returns. As a fund of funds invests in the scheme of other funds, it provides a greater degree of diversification. Instead of investing in different stocks of mutual funds and keeping records of all of them, it is much easier to invest and track only one fund which in turn invests in other mutual funds.
Considerations
Management feeManagement fee
In the investment advisory industry, a management fee is a periodic payment that is paid by investors in a pooled investment fund to the fund's investment adviser for investment and portfolio management services.-Mutual funds:...
s for Funds Of Funds are typically higher than those on traditional investment funds because they include the management fees charged by the underlying funds. As in the case of schemes of mutual funds, FOF schemes also work under the due diligence of a fund manager. This gives the scheme an additional expertise. It also helps to provide access to information which may be difficult to obtain information by an investor on a case by case basis. Every fund manager has a particular style of diversification. This diversification has a perfect correlation with the number of managers involved. Once a FOF reached a certain level of managers, adding more flattens return curve and diversifies away alpha (Harry Prasun Kat2).
Since a fund of funds buys many different funds which themselves invest in many different securities, it is possible for the fund of funds to own the same stock through several different funds and it can be difficult to keep track of the overall holdings.
Funds of funds are often used when investing in hedge fund
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
s and private equity fund
Private equity fund
A private equity fund is a collective investment scheme used for making investments in various equity securities according to one of the investment strategies associated with private equity....
s, as they typically have a high minimum investment level compared to traditional investment funds which precludes many from investing directly. In addition hedge fund and private equity investing is more complicated and higher risk than traditional collective investments. The lack of accessibility favors a FoF with a professional manager and built-in spread of risk.
Pension funds and other institutions often invest in funds of hedge funds for part or all of their "alternative asset" programs, i.e. investments other than traditional stock and bond holdings.
After allocation of the two levels of fees payable and taxation, returns on FoF investments will generally be lower than single-manager funds.
The due diligence
Due diligence
"Due diligence" is a term used for a number of concepts involving either an investigation of a business or person prior to signing a contract, or an act with a certain standard of care. It can be a legal obligation, but the term will more commonly apply to voluntary investigations...
and safety of investing in FoFs has come under question as a result of the Bernie Madoff scandal, where many FoFs put substantial investments into the scheme. It became clear that a motivation for this was the lack of fees by Madoff which gave the illusion that the FoF was performing well. The due diligence of the FoFs apparently did not include asking why Madoff was not making this charge for his services. 2008 and 2009 saw fund of funds take a battering from investors and the media on all fronts from the hollow promises made by over-eager marketers to the strength (or lack) of their due diligence processes to those carefully explained and eminently justifiable extra layers of fees, all reaching their zenith with the Bernie Madoff fiasco.
Private equity fund of funds
According to PreqinPreqin
Preqin is a research and consultancy firm focusing on alternative asset classes. The company covers private equity, real estate, infrastructure, and hedge funds and is headquartered in London, UK, with additional offices in New York and Singapore. Preqin maintains a number of publications and...
(formerly known as Private Equity Intelligence), in 2006 funds investing in other private equity fund
Private equity fund
A private equity fund is a collective investment scheme used for making investments in various equity securities according to one of the investment strategies associated with private equity....
s (i.e., fund of funds, including secondary funds
Private equity secondary market
In finance, the private equity secondary market refers to the buying and selling of pre-existing investor commitments to private equity and other alternative investment funds....
) amounted to 14% of all committed capital in the private equity
Private equity
Private equity, in finance, is an asset class consisting of equity securities in operating companies that are not publicly traded on a stock exchange....
market. The following ranking of private equity fund of fund investment managers is based on information published by Private Equity Intelligence
Preqin
Preqin is a research and consultancy firm focusing on alternative asset classes. The company covers private equity, real estate, infrastructure, and hedge funds and is headquartered in London, UK, with additional offices in New York and Singapore. Preqin maintains a number of publications and...
:
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| Rank | Name of the firm | Currently Committed to PE (billions of USD) |
Headquarters |
|---|---|---|---|
| 1 | AlpInvest Partners AlpInvest Partners AlpInvest Partners is a private equity investment manager and at the end of 2009 globally managed over €42 billion .... |
$42.3 |  AmsterdamAmsterdam Amsterdam is the largest city and the capital of the Netherlands. The current position of Amsterdam as capital city of the Kingdom of the Netherlands is governed by the constitution of August 24, 1815 and its successors. Amsterdam has a population of 783,364 within city limits, an urban population... |
| 2 | AXA Private Equity AXA Private Equity AXA Private Equity is a diversified private equity firm with $ 25 billion of assets managed or advised and with an international reach across Europe, North America and Asia... |
$34.9 |  ParisParis Paris is the capital and largest city in France, situated on the river Seine, in northern France, at the heart of the Île-de-France region... |
| 3 | AIG Investments AIG AIG is American International Group, a major American insurance corporation.AIG may also refer to:* And-inverter graph, a concept in computer theory* Answers in Genesis, a creationist organization in the U.S.* Arta Industrial Group in Iran... |
$24.6 |  New YorkNew York City New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and... |
| 4 | Goldman Sachs Private Equity Group Goldman Sachs The Goldman Sachs Group, Inc. is an American multinational bulge bracket investment banking and securities firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients... |
$24.0 | New York New York City New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and... |
| 5 | Adams Street Partners | $24.0 | Chicago, Illinois |
| 6 | Pantheon Ventures Pantheon Ventures Pantheon is a private equity investment manager, operating through a series of fund of funds as well as a publicly traded private equity vehicle, Pantheon International Participations. Pantheon invests through new private equity funds as well as secondary market purchases of existing private... |
$22.6 | London London London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its... |
| 7 | Pathway Capital Management | $20.6 | Irvine, California Irvine, California Irvine is a suburban incorporated city in Orange County, California, United States. It is a planned city, mainly developed by the Irvine Company since the 1960s. Formally incorporated on December 28, 1971, the city has a population of 212,375 as of the 2010 census. However, the California... |
| 8 | Capital Dynamics | $20.0 |  Zug, Switzerland |
| 9 | Partners Group Partners Group Partners Group is a global private markets management firm with over EUR 20 billion in investment programs under management in private equity, private debt, private real estate, private infrastructure and absolute return strategies... |
$19.6 | Baar-Zug, Switzerland |
| 10 | Lehman Brothers Lehman Brothers Lehman Brothers Holdings Inc. was a global financial services firm. Before declaring bankruptcy in 2008, Lehman was the fourth largest investment bank in the USA , doing business in investment banking, equity and fixed-income sales and trading Lehman Brothers Holdings Inc. (former NYSE ticker... |
$19.0 | New York New York City New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and... |
| 11 | HarbourVest Partners HarbourVest Partners HarbourVest Partners is a private equity fund of funds and one of the largest private equity investment managers globally. The firm invests in all types of private equity funds, including venture capital and leveraged buyout funds, and also directly in operating companies... |
$17.8 | Boston, Massachusetts |
| 12 | PCG Asset Management Pacific Corporate Group Pacific Corporate Group is a global alternative investment management and advisory company headquartered in La Jolla, California. PCG, together with affiliates and subsidiaries currently manage over $17 billion in assets and has invested and advised upon over $44 billion since 1990... |
$15.0 | San Diego, California San Diego, California San Diego is the eighth-largest city in the United States and second-largest city in California. The city is located on the coast of the Pacific Ocean in Southern California, immediately adjacent to the Mexican border. The birthplace of California, San Diego is known for its mild year-round... |
| 13 | Credit Suisse Customized Fund Investment Group Credit Suisse The Credit Suisse Group AG is a Swiss multinational financial services company headquartered in Zurich, with more than 250 branches in Switzerland and operations in more than 50 countries.-History:... |
$14.0 | New York New York City New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and... |
| 14 | LGT Capital Partners | $13.5 | Pfaeffikon, Switzerland |
| 15 | Horizon21 Alternative Investments | $11.5 | Pfaeffikon, Switzerland |
| 16 | SL Capital Partners | $9.3 | Edinburgh Edinburgh Edinburgh is the capital city of Scotland, the second largest city in Scotland, and the eighth most populous in the United Kingdom. The City of Edinburgh Council governs one of Scotland's 32 local government council areas. The council area includes urban Edinburgh and a rural area... |
| 17 | Allianz Private Equity Partners Allianz SE is a global financial services company headquartered in Munich, Germany. Its core business and focus is insurance. As of 2010, it was the world's 12th-largest financial services group and 23rd-largest company according to a composite measure by Forbes magazine.Its Allianz Global Investors... |
$7.9 |  MunichMunich Munich The city's motto is "" . Before 2006, it was "Weltstadt mit Herz" . Its native name, , is derived from the Old High German Munichen, meaning "by the monks' place". The city's name derives from the monks of the Benedictine order who founded the city; hence the monk depicted on the city's coat... |
| 18 | Portfolio Advisors | $7.5 | Darien, Connecticut Darien, Connecticut Darien is a town in Fairfield County, Connecticut, United States. A relatively small community on Connecticut's "Gold Coast", the population was 20,732 at the 2010 census. Darien was listed at #9 at CNN Money's list of "top-earning towns" in the United States as of 2011... |
| 19 | Commonfund Capital | $7.5 | Wilton, Connecticut Wilton, Connecticut Wilton is a town nestled in the Norwalk River Valley in southwestern Connecticut in the United States. It is located in Fairfield County. As of the 2010 census, the town population was 18,062. In 2007, it was voted as one of CNN Money's "Best Places to Live" in the United States.Located along... |
| 20 | Horsley Bridge Partners | $7.1 | San Francisco, California San Francisco, California San Francisco , officially the City and County of San Francisco, is the financial, cultural, and transportation center of the San Francisco Bay Area, a region of 7.15 million people which includes San Jose and Oakland... |
| 21 | SVG Capital SVG Capital SVG Capital is a leading British private equity and investment management business. It is headquartered in London and is a constituent of the FTSE 250 Index.-History:... |
$7.0 | London London London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its... |
| 22 | European Investment Fund European Investment Fund The European Investment Fund, established in 1994, is a European Union agency for the provision of finance to SMEs headquartered in Luxembourg.... |
$6.8 |  LuxembourgLuxembourg Luxembourg , officially the Grand Duchy of Luxembourg , is a landlocked country in western Europe, bordered by Belgium, France, and Germany. It has two principal regions: the Oesling in the North as part of the Ardennes massif, and the Gutland in the south... |
| 23 | Macquarie Funds Management Group | $6.1 |  SydneySydney Sydney is the most populous city in Australia and the state capital of New South Wales. Sydney is located on Australia's south-east coast of the Tasman Sea. As of June 2010, the greater metropolitan area had an approximate population of 4.6 million people... |
| 24 | Abbott Capital Management | $6.0 | New York New York City New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and... |
| 25 | Natixis Private Equity Natixis Natixis is a French corporate and investment bank created in November 2006 from the merger of the asset management and investment banking operations of Natexis Banque Populaire and IXIS .... |
$5.7 | Paris Paris Paris is the capital and largest city in France, situated on the river Seine, in northern France, at the heart of the Île-de-France region... |
Source: Preqin (formerly known as Private Equity Intelligence)
According to 2011 Preqin Global Private Equity Report, largest firms by total fund of funds capital raised in the last 10 years ($bn) are:
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| Rank | Name of the firm | Total FoF Capital Raise in last 10 years (billions of USD) |
Location |
|---|---|---|---|
| 1 | HarbourVest Partners HarbourVest Partners HarbourVest Partners is a private equity fund of funds and one of the largest private equity investment managers globally. The firm invests in all types of private equity funds, including venture capital and leveraged buyout funds, and also directly in operating companies... |
$19.3 | US |
| 2 | Adams Street Partners | $12.5 | US |
| 3 | Pantheon Ventures Pantheon Ventures Pantheon is a private equity investment manager, operating through a series of fund of funds as well as a publicly traded private equity vehicle, Pantheon International Participations. Pantheon invests through new private equity funds as well as secondary market purchases of existing private... |
$12.1 | UK |
| 4 | Goldman Sachs Private Equity Group Goldman Sachs The Goldman Sachs Group, Inc. is an American multinational bulge bracket investment banking and securities firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients... |
$10.9 | US |
| 5 | Pathway Capital Management | $9.8 | US |
| 6 | Commonfund Capital | $7.3 | US |
| 7 | Siguler Gulf | $6.8 | US |
| 8 | SL Capital Partners | $6.7 | UK |
| 9 | ATP Private Equity Partners | $6.5 |  DenmarkDenmark Denmark is a Scandinavian country in Northern Europe. The countries of Denmark and Greenland, as well as the Faroe Islands, constitute the Kingdom of Denmark . It is the southernmost of the Nordic countries, southwest of Sweden and south of Norway, and bordered to the south by Germany. Denmark... |
| 10 | Partners Group Partners Group Partners Group is a global private markets management firm with over EUR 20 billion in investment programs under management in private equity, private debt, private real estate, private infrastructure and absolute return strategies... |
$5.8 | Switzerland Switzerland Switzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition.... |
Source: Preqin
Fund of hedge funds
A fund of hedge funds is a fund of funds that invests in a portfolio of different hedge fundHedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
s to provide broad exposure to the hedge fund industry and to diversify the risks associated with a single investment fund. Funds of hedge funds select hedge fund managers and construct portfolios based upon those selections. The fund of hedge funds is responsible for hiring and firing the managers in the fund. Some funds of hedge funds might have only one hedge fund in it, this lets ordinary investors into a highly-acclaimed fund, or many hedge funds.
Funds of hedge funds generally charge a fee for their services, always in addition to the hedge fund's management and performance fees, which can be 1.5% and 15-30%, respectively. Fees can reduce an investor's profits and potentially reduce the total return below what could be achieved through a less expensive mutual fund
Mutual fund
A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors to buy stocks, bonds, short-term money market instruments, and/or other securities.- Overview :...
or ETF
ETF
ETF may refer to:* Exchange-traded fund, an investment vehicle* European Training Foundation, a vocational training organization* European Transport Workers' Federation* Emergency Task Force, a tactical unit of the Toronto Police* Enriched text format...
.
While funds of funds conceptually can provide extremely useful services for many hedge fund
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
investors, they have been criticised for the significant incremental costs they impose. (The underlying hedge funds usually charge fees of between 1 and 2% of assets managed and incentive fees of 15–25% of profits generated. The funds of funds typically add additional fees of 1% and 10%, respectively). Moreover, fund-of-funds behavior has often exhibited crowd-following tendencies, suggesting the managers of these funds prefer to match indices rather than seek opportunities.
The industry has recently been criticized by some hedge fund managers for a reputation of holding a short-term view. Some hedge funds have even started turning away fund of hedge funds money. “It is really beginning to irritate those funds of hedge funds that approach their investments sensibly,” says one fund of hedge funds manager.
The first fund of funds was started by the Rothschild family
Rothschild family
The Rothschild family , known as The House of Rothschild, or more simply as the Rothschilds, is a Jewish-German family that established European banking and finance houses starting in the late 18th century...
in Europe in 1969 under the name Leveraged Capital Holdings. In 1971, Richard Elden founded Grosvenor Capital Management
Grosvenor Capital Management
Grosvenor Capital Management is one of the largest hedge fund sponsors globally. With estimated assets under management of $22.6 billion as of December 31, 2009, Grosvenor ranked as the third largest firm, but the largest independent firm...
in Chicago, Illinois, introducing the concept of fund of funds to the United States.
Fund of venture capital funds
A fund of venture capital funds is a fund of funds that invests in a portfolio of different venture capital funds to access to private capital markets. Clients are usually university endowments and pension funds.See also
- Collective investment schemeCollective investment schemeA collective investment scheme is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group...
s - Investment managementInvestment managementInvestment management is the professional management of various securities and assets in order to meet specified investment goals for the benefit of the investors...
- Manager of managers fundManager of managers fundA "manager of managers fund" is an investment fund that uses an investment strategy of directly selecting different investment managers and gives them mandate to make investment decisions. This is different from the traditional mutual fund where only one manager invests the fund capital in stock,...
- Bernard Cornfield, operator of perhaps the first "Fund of Funds" from 1962 until its collapse in 1970. http://books.google.com/books?id=P41ij0GoFL4C&pg=PA445&lpg=PA445&dq=%22fund+of+funds%22+Cornfield&source=web&ots=eQiUj5ihji&sig=5109NV3Sr-uHu6qVIkyogKj2E5I&hl=en&sa=X&oi=book_result&resnum=3&ct=result.