Fund Of Funds


DEFINITION of 'Fund Of Funds'

A mutual fund that invests in other mutual funds.

This method is sometimes known as "multi-management".


A fund of funds allows investors to achieve a broad diversification and an appropriate asset allocation with investments in a variety of fund categories that are all wrapped up into one fund. However, if the fund of funds carries an operating expense, investors are essentially paying double for an expense that is already included in the expense figures of the underlying funds.

Historically, a fund of funds showed an expense figure that didn't always include the fees of the underlying funds. As of January 2007, the SEC began requiring that these fees be disclosed in a line called "Acquired Fund Fees and Expenses" (AFFE).

  1. Portfolio

    A grouping of financial assets such as stocks, bonds and cash ...
  2. Diversification

    A risk management technique that mixes a wide variety of investments ...
  3. Expense Ratio

    A measure of what it costs an investment company to operate a ...
  4. Master Fund

    In general, an investment vehicle that enables individual investors ...
  5. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
  6. Fund Manager

    The person(s) resposible for implementing a fund's investing ...
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