U.S. Investors Still Not Sold on Fund of Funds Concept: A Look at the Pros and Cons of This Product Type
There are many different types of funds that can be invested in: money market funds, bond/income funds, balanced funds, equity funds, global/international funds, specialty funds, index funds and so forth. Many investors are familiar with these types of funds, but in recent years, in the United States, a new kind of fund strategy has been introduced: fund of funds.
When thinking of the term fund of funds, it seems easy to understand. One would think that essentially, it is a fund that invests in other funds, but there is more to it than that.
“The ‘fund’ part of fund of funds means that there are multiple investors, then the ‘funds’ part of fund of funds means that the money in the fund gets invested in multiple terms,” explains Steve Felix, head of real estate client relations – North America, with Aviva Investors. So to put it in plain terms, a fund of funds is