0 What is Fund Of Hedge Funds?

 Fund of hedge funds is an investment strategy of holding funds than investing directly. Instead of investment in stocks, bonds or other derivative securities investment fund is held and is invested in other funds. For Example, a hedge fund that invest in other hedge funds. It is termed as multi manager or collective investment. Investment in fund of funds enhances diversity because of collective investment. On the contrary to a investor holding on certain range of security. Diversification comes with reduced volatility with moderate returns on investments. Fund of hedge funds uses a managerial strategy of investing only in hedge funds. The strategies of fund of hedge funds may vary in order to gain market exposure. Fund of funds comes with efficient and diverse management and depending on his skill you may make greater returns. The fund manager with his full expertise and years of experience opts the best funds based on previous performance. A skilled manager can reduce the risk involved of investing in a single fund and increase the potential returns. Fund of hedge funds New York due to their investment in other funds provides great diversification. Fund of hedge funds relieves you of investing in different stocks and keeping a track of all of them. It allows you to invest in a single stock and track it which in turn invests in other funds. Fund of hedge funds comes with alternate benefits. As in every hedge fund the initial investment amount is huge, fund of hedge fund allows access to invest in best funds with comparatively less investment. Fund of hedge funds require very less initial investment. At times fund of hedge funds invest only in one fund and offers shares at relatively less initial investment.
This gives an opportunity to investors to own acclaimed fund at comparatively lower cash. Fund of hedge fund incurs a management fee that is higher than the traditional underlying funds. The disadvantage of fund of hedge funds is the incremental fee. Fund managers disagree to the fact of high fee in comparison to the risk taken returns offered by them. Fund of hedge fund are appealing due to their returns and their diverse nature reducing risk driven factors. The lowered initial investment option also is attracting investors. Hedge funds are always talk of the town and attract investors because investors need to have only limit assets to invest. They can allocate funds to their close associates running a single fund strategy or can get diverse by investing it in multiple hedge funds at one time. Investors prefer paying 1% fee in return of stress free investment with lower risk factors. The other reason for hedge fund of funds popularity among investors is that majority of assets are from institutions. Fund of hedge funds maximum investment is from institutions and is rise in full swing. Institutional investors take a longer view comparatively high net worth individuals. The institutional use of hedge funds is all in full swing and its decline will need some very solid event. Hedge fund service providers specialize in fund of funds, derivative documentation and financial accounting.

Author Bio:
I am Liza brown a marketing manager at HF solutions LLC (http://www.hfsolutionsllc.com) based in New York that specializes in hedge funds and derivative documentation.