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Fund o f funds

Funds of funds

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Fund o f funds

  1. 1. FUND of FUNDS<br />Rumi Jain 2010191<br />SaritaChowdhary 2010296 <br />
  2. 2. Flow of Presentation<br />What is Fund of Funds?<br />How it Works?<br /> Types of 'fund of funds‘<br />Why you should invest in FOF?<br />Indian Context<br />Why you should not invest in FOF?<br />Example : Bernie Madoff scandal<br />
  3. 3. What is Fund of Funds?<br />A "fund of funds" (FOF) is an investment strategy of holding a portfolio of other investment funds rather than investing directly in share, bonds and securities.<br />
  4. 4. What is Fund of Funds?<br />Often referred to as multi-manager investment.<br />
  5. 5.  types of 'fund of funds'<br />Mutual fund FoF: A Mutual fund FoF invests in other mutual funds. Just as a mutual fund invests in a number of different securities, a fund of funds holds shares of many different mutual funds. <br />Hedge fund FoF: A Hedge fund FoF invests in a portfolio of different hedge funds to provide broad exposure to the hedge fund industry and to diversify the risks associated with a single investment fund. <br />
  6. 6. Why you should invest in FOF?<br />Simplicity - one-stop shopping<br />Double diversification.<br />Cheap For the New Investors:<br />Institutional advantages.<br />Good for the beginners/lay investors.<br />Provide Liquidity.<br />Portfolio of managers<br /> Additional expertise.<br />
  7. 7. Indian Context<br />FoFschemes suffer from immense lack of popularity.<br />Only 8 out of 43 operating  funds are offering FoF schemes.<br />The ratio of AUM of funds offering FoF schemes is just 0.41% of the total AUM.<br />Returns are also not attractive.<br />
  8. 8. Why you should not invest in FOF?<br />
  9. 9. Why you should not invest in FOF?<br />More Can Mean “Di-worse-ification”<br />
  10. 10. Why you should not invest in FOF?<br />Doubling up of fees<br />
  11. 11. Why you should not invest in FOF?<br />Netting Risk/Return<br />
  12. 12. Bernie Madoff scandal<br />The due deligence and safety of investing in FoFs has come under question as a result of the BerniwMadoff scandal.<br />Where many FoFs put substantial investments into the scheme. <br />2008 and 2009 saw fund of funds take a battering from investors and the media on all fronts from the hollow promises.<br />
  13. 13. Conclusion<br />FOFs can be pain-free entrance for investors<br />Careful management is necessary for FOF to prevent holding overlapping securities. <br />It require a very professional management.<br />
  14. 14. Conclusion<br />Simple, Direct Investment may Be Better<br />Less transparency<br />Bigger is Not Necessarily Better<br />
  15. 15. REFERRENCES<br />http://en.wikipedia.org/wiki/Fund_of_funds<br />http://www.businessinsider.com/fund-of-funds-diversification-2010-9<br />http://tribleyassetmanagement.com/about-hedge-funds/advantages-of-a-fund-of-hedge-funds/<br />http://www.washingtonpost.com/wp-dyn/content/article/2006/09/30/AR2006093000107.html<br />http://www.economywatch.com/mutual-funds/types/funds-of-funds.html<br />