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.

Monthly returns201620172018
January-2.66%0.95%2.09%
February-1.26%0.80%-1.27%
March0.71%0.41%-0.44%
April0.53%0.57%0.22%
May0.59%0.33%n.a.
June-0.74%-0.06%n.a.
July1.34%0.97%n.a.
August0.43%0.75%n.a.
September0.40%0.39%n.a.
October-0.27%1.13%n.a.
November0.22%-0.07%n.a.
December0.90%0.64%n.a.
Annual0.12%7.01%0.57%
S&P 50011.96%21.83%-0.38%
Lehman Treasury1.04%2.31%-1.98%
Quarterly returns201620172018
1st Quarter-3.21%2.17%0.35%
2nd Quarter0.37%0.84%0.22%
3rd Quarter2.18%2.12%n.a.
4th Quarter0.86%1.71%n.a.
Annual0.12%7.01%0.57%
S&P 50011.96%21.83%-0.38%
Lehman Treasury1.04%2.31%-1.98%
Risk ProfileEdhec Funds of Funds IndexS&P 500Lehman Treasury
Monthly Std Dev Ann'd4.50%14.33%4.47%
Sharpe Ratio-0.100.230.03
Information ratio-0.31n.a.n.a.
Min. Monthly Return-6.18%-16.80%-4.39%
Max. Monthly Return3.12%10.93%5.31%
Mean Monthly Return0.29%0.59%0.34%
Median Monthly Return0.51%1.07%0.40%
Exc. Kurtosis4.581.391.48
Skewness-1.42-0.660.02
% of winning Months66.83%65.38%58.65%
Average Winning Return0.99%2.89%1.15%
% of losing Months33.17%34.62%41.35%
Average Losing Return-1.10%-3.75%-0.81%
Correlation AnalysisEdhec Funds of Funds IndexS&P 500Lehman Treasury
S&P 5000.661.00-0.35
S&P 500 Value0.620.97-0.35
S&P 500 Growth0.660.97-0.34
S&P Mid Cap0.690.92-0.34
S&P Small Cap0.600.86-0.36
Lehman Treasury-0.26-0.351.00
Baa-Aaa-0.14-0.070.05
Chg in Baa - Aaa-0.26-0.120.18
10 years - 3 Months-0.14-0.050.11
Chg in 10 years - 3 Months-0.02-0.03-0.05
VIX-0.47-0.440.27
Chg in VIX-0.50-0.660.20
in %HFRHF NetBarclayAltvest
2006 Q225.0%25.0%25.0%25.0%
2006 Q324.4%25.2%25.2%25.2%
2006 Q424.3%25.2%25.2%25.2%
2007 Q124.4%25.2%25.2%25.2%
2007 Q224.4%25.2%25.2%25.2%
2007 Q324.4%25.2%25.2%25.2%
2007 Q424.5%25.2%25.2%25.1%
2008 Q124.6%25.2%25.2%25.1%
2008 Q224.7%25.1%25.1%25.0%
2008 Q324.7%25.1%25.1%25.1%
2008 Q424.8%25.1%25.1%25.0%
2009 Q124.9%25.1%25.0%25.1%
2009 Q224.9%25.1%25.0%25.1%
2009 Q325.0%25.0%25.0%25.0%
2009 Q425.0%25.0%25.0%25.0%
2010 Q125.0%25.0%25.0%25.0%
2010 Q225.0%25.0%25.0%25.0%
2010 Q325.0%25.0%25.0%25.0%
2010 Q425.0%25.0%25.0%25.0%
2011 Q125.0%25.0%25.0%25.0%
2011 Q225.0%25.0%25.0%25.0%
2011 Q325.0%25.0%25.0%25.0%
2011 Q425.0%25.0%24.9%25.0%
2012 Q125.0%25.0%25.0%25.0%
2012 Q233.3%33.3%33.3%n.a.
2012 Q333.3%33.3%33.3%n.a.
2012 Q433.3%33.3%33.3%n.a.
2013 Q133.3%33.3%33.3%n.a.
2013 Q233.3%33.3%33.3%n.a.
2013 Q333.3%33.3%33.3%n.a.
2013 Q433.3%33.3%33.3%n.a.
2014 Q133.3%33.3%33.3%n.a.
2014 Q233.3%33.3%33.4%n.a.
2014 Q333.3%33.3%33.3%n.a.
2014 Q433.3%33.3%33.4%n.a.
2015 Q133.3%33.3%33.3%n.a.
2015 Q233.3%33.3%33.3%n.a.
2015 Q333.3%33.3%33.3%n.a.
2015 Q433.3%33.3%33.3%n.a.
2016 Q133.3%33.3%33.3%n.a.
2016 Q233.4%33.3%33.3%n.a.
2016 Q333.4%33.3%33.4%n.a.
2016 Q433.4%33.3%33.4%n.a.
2017 Q133.4%33.3%33.4%n.a.
2017 Q233.4%33.3%33.4%n.a.
2017 Q333.4%33.2%33.4%n.a.
2017 Q433.4%33.2%33.4%n.a.
2018 Q133.4%33.2%33.4%n.a.
2018 Q233.4%33.2%33.4%n.a.
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