A fund of funds is an investment vehicle that invests entirely in other funds. An early and still typical type of fund of funds is the fund of funds that invests in many mutual funds, just as the mutual fund invests in many individual stocks. A fund of funds may be described in a way that indicated what type of funds it invests in. For example, a private equity fund of funds probably invests its capital in only private equity funds. A growing class of fund of funds is the fund of funds that invests primarily in hedge funds. This type of fund of funds is usually called a fund of hedge funds. Such a fund may have a much smaller minimum investment than the typical hedge fund, opening the door to this type of alternative investment to a much larger pool of investors. |
