Manager of Managers and "Fund of Funds" Funds
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If you are less familiar with the investment world, you are unlikely to be too familiar with a Manager of Managers fund, sometimes referred to simply as an MoM fund. Manager of Managers funds are a form of investment funds similar to multi-manager asset management in that they utilise an investment strategy that directly selects numerous different investment managers within one fund and give them the control to identify and make investments. Whereas most traditional mutual funds are managed by only one manager and typically invest in one particular area of finance whether that be commodities, equities, bonds or similar investment products, the MoM funds can benefit from investing in numerous different investment funds.
A fund of funds (commonly referred to as FoF funds) is a similar type of investment strategy but instead of allowing a series of managers to invest the funds directly on behalf of the MoM fund, it invests the clients money in a series of other investment funds. Instead of investing directly itself in financial products such as equities, bonds etc it does so through other funds - splitting it’s investment capital over funds investing in the different products. These types of funds usually come in two forms, either fettered which means that they are FoF that invests only in different funds managed by the firm itself or unfettered which conversely means that they can invest in any funds whether that be a combination of their own and external funds or just external ones. They categorised further depending on the type of funds that they are investing in, for example you may choose to invest in a hedge fund FoF or a private equity FoF.
The idea behind both Manager of Manager funds and Fund of Funds is that they can offer a much higher degree of diversification than most investment options, in terms of both a large number of underlying stocks and a range of investment styles and strategies. The majority of investors are more concerned about high losses in the bad times than they are with making high gains in the good times. Most asset managers are always discussing the integral nature of diversification as a way of taking the edge of any market corrections. Some assets are highly correlated and move in similar ways according to different market conditions. In this way, a portfolio of funds can both enhance investment performance through superior stock and bond picking skills, whilst reducing risk through an appropriate diversification of assets, strategies and styles.
Many companies offering these type of funds go back to the old phrase “Jack of all trades, master of nothing”. By this I mean that no multi-asset fund manager, even with a team of support analysts can be an expert in all of the asset classes but by utilising the two investment fund products discussed in this articles it is possible to benefit from the experience of numerous different managers and funds, all experts in their own particular area.
A fund of funds (commonly referred to as FoF funds) is a similar type of investment strategy but instead of allowing a series of managers to invest the funds directly on behalf of the MoM fund, it invests the clients money in a series of other investment funds. Instead of investing directly itself in financial products such as equities, bonds etc it does so through other funds - splitting it’s investment capital over funds investing in the different products. These types of funds usually come in two forms, either fettered which means that they are FoF that invests only in different funds managed by the firm itself or unfettered which conversely means that they can invest in any funds whether that be a combination of their own and external funds or just external ones. They categorised further depending on the type of funds that they are investing in, for example you may choose to invest in a hedge fund FoF or a private equity FoF.
The idea behind both Manager of Manager funds and Fund of Funds is that they can offer a much higher degree of diversification than most investment options, in terms of both a large number of underlying stocks and a range of investment styles and strategies. The majority of investors are more concerned about high losses in the bad times than they are with making high gains in the good times. Most asset managers are always discussing the integral nature of diversification as a way of taking the edge of any market corrections. Some assets are highly correlated and move in similar ways according to different market conditions. In this way, a portfolio of funds can both enhance investment performance through superior stock and bond picking skills, whilst reducing risk through an appropriate diversification of assets, strategies and styles.
Many companies offering these type of funds go back to the old phrase “Jack of all trades, master of nothing”. By this I mean that no multi-asset fund manager, even with a team of support analysts can be an expert in all of the asset classes but by utilising the two investment fund products discussed in this articles it is possible to benefit from the experience of numerous different managers and funds, all experts in their own particular area.
