Funds of Funds (FoF) have been regarded as a popular solution for professional investors.
Today, an AMC on funds is an even better way to achieve a broad diversification while offering appropriate asset allocation. Investing in low correlated portfolios in the same asset class should, in theory, lead to a portfolio that is less exposed to high volatility swings compared to direct investments in securities or single funds. This helps to achieve better risk adjusted returns in the portfolio context.
Unfortunately, investors face the fact that the returns, generated by fund managers, are exposed to an accumulation of operating fees carried buy the underlying fund. In addition, Fund of Funds managers charge their own fees on top for the investment process. As a result, investors find themselves with high running costs (TER) if they wish to gain access to a professional diversified portfolio. Additionally, not all funds are accessible for qualified investors. Many prestigious funds have an insuperable hurdle and special requirements for those wanting to be part of those investment schemes.