Funds of Funds are portfolios of Hedge Funds offering the investor exposure to a wide range of alternative investment styles and strategies.
Funds of Funds generally allocate capital to 15-30 hedge funds to achieve efficient risk diversification. Nevertheless a smaller number of funds may be used to concentrate capital on a particular strategy. Such funds of hedge funds aim to post high returns and are less concerned by manager and event risks. Conversely, a larger number of funds may be used to control for extreme risks.
Most Funds of Funds invest in portfolios diversified by manager and strategy which enable them to produce consistent absolute returns with low levels of risk. As a result, Funds of Funds are often used as portable alpha strategies or as substitutes for cash in portfolios.
Funds of Funds have very compelling characteristics since they provide hedge fund investors with access to experienced management, enhanced liquidity and less risk of default. They may also provide hedge funds investors with access to closed funds. The double fee structure is the main flip side of investing in funds of funds.
|Risk Profile||Edhec Funds of Funds Index||S&P 500||Lehman Treasury|
|Monthly Std Dev Ann'd||4.51%||14.39%||4.43%|
|Min. Monthly Return||-6.18%||-16.80%||-4.39%|
|Max. Monthly Return||3.12%||10.93%||5.31%|
|Mean Monthly Return||0.26%||0.55%||0.34%|
|Median Monthly Return||0.43%||1.07%||0.40%|
|% of winning Months||65.74%||65.74%||58.80%|
|Average Winning Return||0.97%||2.85%||1.14%|
|% of losing Months||34.26%||34.26%||41.20%|
|Average Losing Return||-1.11%||-3.87%||-0.80%|
|Correlation Analysis||Edhec Funds of Funds Index||S&P 500||Lehman Treasury|
|S&P 500 Value||0.62||0.97||-0.35|
|S&P 500 Growth||0.67||0.97||-0.33|
|S&P Mid Cap||0.70||0.93||-0.34|
|S&P Small Cap||0.61||0.87||-0.35|
|Chg in Baa - Aaa||-0.26||-0.09||0.14|
|10 years - 3 Months||-0.11||-0.03||0.11|
|Chg in 10 years - 3 Months||-0.02||-0.03||-0.05|
|Chg in VIX||-0.51||-0.67||0.19|
|in %||HFR||HF Net||Barclay||Altvest|
|Hedge Fund Strategies : December 2018|
|Equity Market Neutral||0.40%|
|Fixed Income Arbitrage||-0.65%|
|Funds of Funds||-1.63%|
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