Fund of Funds

A fund of funds is an investment strategy that involves pooling money to invest in a variety of other investment funds, rather than directly in individual stocks or bonds. This approach allows investors to gain diversified exposure to multiple asset managers and strategies within one investment. By spreading investments across different funds, the risk is reduced because poor performance in one fund may be offset by better performance in others. Fund of funds are commonly used in hedge funds and mutual funds to enhance potential returns while managing risk.