Fund of Funds

The_Fiddler_2

Could someone please expalain exactly to me what a fund of funds is and how it operates?

Thanks

The_Fiddler_2

Edit I meant this post as a new thread

Aegis

From what I've gathered, a fund of fund is essentially where you invest money into a pool that a manager then uses to invest in other funds which match the overall risk profile of the investors.

Probably quite good if you want a fair bit of diversity with little cash, but usually they're more expensive because you have to pay your fund manager, and he has to pay the fund managers of the funds he invests your money in. Probably not as much as twice the price, but certainly costlier than just getting in to managed funds yourself through a fund supermarket. You also have no control over which funds the manager invests in within the chosen sectors, while managing your own portfolio allows you to personally veto any choices you don't like by simply not investing in the first place!

As for risk levels, those tend to vary dramatically between sectors. For example, I believe that UK and Global Equity funds tend to be comparatively low risk, while Emerging Markets tend to be much higher. I'm not much of an expert on the risk levels or anything, so I think I'll let someone else go into a little more detail on that!

dunstonh

Fund of funds are not necessarily as expensive as you think. There are some expensive examples but the costs are much lower than they used to be.

They are typically a little higher than doing your own spread but when you consider many fund of funds have 15-30 funds in their holdings, with smaller amounts, that sort of diversity is not possible with many fund platforms.

Aegis

dunstonh wrote: »

Fund of funds are not necessarily as expensive as you think. There are some expensive examples but the costs are much lower than they used to be.

They are typically a little higher than doing your own spread but when you consider many fund of funds have 15-30 funds in their holdings, with smaller amounts, that sort of diversity is not possible with many fund platforms.

Really useful information for my own future portfolio building, thanks for the correction!

I think I'll still stick with directly picking my own funds for the moment, but maybe in a few years when the fun of actually doing all my own research on the sectors and the associated risks has died down a little!

The_Fiddler_2

Which ones would you recommend?

Aegis

I don't know if it's actually acceptable to recommend funds/shares on this site... I may have misinterpreted the rules, but thought I'd mention it as a possibility so that you don't get too disappointed if you don't receive an answer.

The_Fiddler_2

Aegis wrote: »

I don't know if it's actually acceptable to recommend funds/shares on this site... I may have misinterpreted the rules, but thought I'd mention it as a possibility so that you don't get too disappointed if you don't receive an answer.

OK - Thanks - I wasn't really thinking when I asked that question

The_Fiddler_2

Maybe a more general question then - what kinds of sectors of funds?

jamesd

How much money, either as a lump sum or regularly?

The_Fiddler_2

At the moment either could be a possibility.