Fund of funds

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Fund of funds

A mutual fund or hedge fund that invests in other funds.

Fund of Funds

A mutual fund that invests exclusively in other mutual funds. Theoretically, funds of funds allow the investor to diversify risk even more than in a regular mutual fund without reducing return significantly. One disadvantage is the fact that most funds of funds have higher fees because shareholders have to pay fees for the funds of funds themselves and must also pay fees for the underlying funds. Funds of funds were especially popular in the 1960s.

fund of funds

An open-end investment company that invests only in the shares of other open-end investment companies. This type of mutual fund was popular during the 1960s but subsequently fell into disfavor with investors. Many analysts consider it more of a gimmick than a useful investment vehicle.

Fund of funds (FOF).

A fund of funds is a pooled investment, such as a mutual fund or a hedge fund, whose underlying investments are other funds rather than individual securities.

Despite some major differences, what all funds of funds have in common is an emphasis on diversification for its potential to reduce risk without significantly reducing return.

They're also designed to simplify the investment process by offering one-stop shopping.

Many mutual fund FOFs are asset allocation funds and typically include both stock and bond funds in a particular combination that the FOF manager has chosen to meet a specific objective. A mutual fund FOF may select all its funds from a single fund family or it may choose funds offered by different investment companies.

A hedge fund FOF, which owns stakes in other hedge funds, allows investors to commit substantially less money to gain exposure to this investment category than it would cost to invest in even one fund.

A major drawback with all funds of funds is that the fees tend to be higher than you would pay owning the underlying funds directly.

References in periodicals archive ?
Although the BCT struggled to maximize military police capabilities for the first two phases of FOF operations, the last phase showed marked improvement and innovation.
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According to the Tax Court, Van Dusen had demonstrated a strong connection with FOF that made her expenses incident to providing services for the organization potentially deductible.
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If the FOF really plays such an important part in the lives of men, as the O'Neil et al (1986) GRC paradigm argues, then it should be used as a viable way to also explore men's gender roles.
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Aside from training potential candidates, FOF Action has stepped up its intervention in political races.
Dobson's letter of explanation also contained an appeal for donations, fueling speculation that his new venture may compete with Focus on the Family for funding - although Dob-son has urged supporters to continue to give to FOF.
In total, 68 Representatives and 32 Senators from the Michigan legislature received the FOF endorsement.
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