Fund of funds
What is it?
It is an investment fund that invests in other funds rather than directly in individual assets. The purpose of this model is to diversify the investment by creating a portfolio composed of multiple funds, allowing investors to access a wide range of assets without having to manage each one individually.
By investing in a fund of funds, investors can access a variety of strategies and markets, which reduces the risk associated with concentrating investments in a single asset type. This strategy is particularly useful for those who desire greater diversification without having to select and manage specific funds.
Key aspects to consider
A Fund of funds offers the possibility to invest in funds that, in turn, may focus on different asset classes such as stocks, bonds, real estate, or alternative funds. This approach allows investors to gain exposure to multiple markets and sectors without needing to conduct exhaustive research on each individual fund.
The management of these funds is handled by a team of professional managers who select the appropriate funds to include in the portfolio based on established profitability and risk objectives. Additionally, funds of funds allow investors to take advantage of economies of scale and better manage fees, as they are exposed to the combined costs of the underlying funds.
While funds of funds provide diversification and access to a broader range of assets, they may also have higher fees due to the costs associated with the underlying funds. Therefore, it is important to evaluate both the fees and the investment strategy before participating in this type of fund.