These funds offer unique advantages to smaller investors looking to benefit from better diversification options than they would otherwise have access to on the open securities market. However, investing in a fund of funds comes with its own set of challenges, not least of which is initially identifying a suitable FOF to invest in.
Many funds of funds have proven to be short-lived, and this can introduce an additional element of risk for new investors looking for a safer alternative to other forms of securities investing. A fund of funds must also be run by competent professionals with the necessary skills and discernment to allocate capital among other well-performing funds.
