Fund of Hedge Funds - Dumb and Dumber?

[mastersuniverse.net]

The concept of fund of funds seems to defy all human logic and commons sense. A fund of funds invests in a portfolio of other investment funds rather than investing directly. They are supposed to be good at picking fund managers. Of course, someone skilled at picking fund of funds managers may well start a “fund of funds of funds” or even a “fund of funds of funds of funds”, generating even more layers of fees.

The real value of a fund of funds lies in the skill of picking managers. It is essentially the same as someone coming to you with the following proposal - “I don’t know much about investing, but give me some money anyway because I know Warren Buffet is very good at this. I will go and buy shares in Berkshire Hathaway and charge you a hefty fee for the service.” Your instinctive response may be harsh with some colorful languages asking the person to “take a hike”.

Find out more about Fund of Funds on www.mastersuniverse.net

[staffjam]

The FOF's have been revealed for what they are - a complete waste of time.
It's supposed to add a second layer of due diligence to the process - but that clearly wasn't the case. I think in 2 years time there will be very few FOF's.

[jimjonesjj]

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