Understanding how Funds of Funds (FoF) work

A Fund of Funds (FoF) is an investment product that invests in other investment funds rather than directly in assets. This gives investors the diversification and flexibility they need to achieve an adequate return on their investment. A **FoF** is typically managed by a team of private equity experts who select quality funds and manage the portfolio for specific objectives.

Investors may choose Funds of Funds for a variety of reasons, including to gain experience and knowledge in investment funds that would otherwise be inaccessible to them, to enhance diversification, and to access the expertise of selected fund managers and fund managers. An FoF may include funds from different fields, including venture capital, development capital and private equity.

Funds of Funds are generally divided into categories that reflect investment strategies, portfolio strategies, styles and sectors. These classifications can include growth-oriented products, value-oriented products, social impact products, market-sized or concentrated products, and products with no capital limit.

Funds of Funds have been around for several decades and have become one of the most popular investment products for institutional and individual investors. FoFs offer access and a degree of diversification that may otherwise be difficult to achieve. However, FoFs also have higher administration fees than a traditional fund.