FUND OF FUNDS

Rumi Jain 2010191

Sarita Chowdhary 2010296

FLOW OF PRESENTATION What is Fund of Funds? How it Works?  Types of 'fund of funds‘ Why you should invest in FOF? Indian Context Why you should not invest in FOF? Example : Bernie Madoff scandal

WHAT IS FUND OF FUNDS? 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.

WHAT IS FUND OF FUNDS? Often referred to as multi-manager

investment.

 TYPES OF 'FUND OF FUNDS' 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. 

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. 

WHY YOU SHOULD INVEST IN FOF?

Simplicity - one-stop shopping Double diversification. Cheap For the New Investors: Institutional advantages. Good for the beginners/lay investors. Provide Liquidity. Portfolio of managers  Additional expertise.

INDIAN CONTEXT

FoF schemes suffer from immense lack of

popularity.

Only 8 out of 43 operating  funds are

offering FoF schemes.

The ratio of AUM of funds offering FoF

schemes is just 0.41% of the total AUM.

Returns are also not attractive.

WHY YOU SHOULD NOT INVEST IN FOF?

WHY YOU SHOULD NOT INVEST IN FOF? More Can Mean “Di-worse-ification”

WHY YOU SHOULD NOT INVEST IN FOF? Doubling up of fees

WHY YOU SHOULD NOT INVEST IN FOF? Netting Risk/Return

BERNIE MADOFF SCANDAL

The due deligence and safety of investing in FoFs has come under question as a result of the Berniw Madoff scandal.

Where many FoFs put substantial investments into the scheme.

2008 and 2009 saw fund of funds take a battering from investors and the media on all fronts from the hollow promises.

CONCLUSION FOFs can be pain-free entrance for

investors

Careful management is necessary for FOF to prevent holding overlapping securities.

It require a very professional management.

CONCLUSION Simple, Direct Investment may Be

Better

Less transparency

Bigger is Not Necessarily Better

REFERRENCES http://en.wikipedia.org/wiki/Fund_of_fun

ds http://

www.businessinsider.com/fund-of-funds-diversification-2010-9

http://tribleyassetmanagement.com/about-hedge-funds/advantages-of-a-fund-of-hedge-funds/

http://www.washingtonpost.com/wp-dyn/content/article/2006/09/30/AR2006093000107.html

http://www.economywatch.com/mutual-funds/types/funds-of-funds.html