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December 01, 2005
Fund of Funds: A Possibility for Retail Investors
For years, deep-pocketed investors have done well for themselves by parking a certain portion of their spare money into Hedge funds. A classic case is the Yale University endowment which invested heavily into hedge funds during the last two decades. The Yale University endowment bagged an annual return of over 16 percent per annum.
However, when it comes to retail investors, Hedge funds seem a distant dream. But if you are still tempted to try to earn such high returns then there is a way out. One possible solution is to invest in a fund of hedge funds. A typical fund of hedge funds contains investments in at least several individual hedge funds.
Such funds not only offer strong diversification, but they also generally require a much lower initial investment than individual hedge funds. And what differentiates such funds from individual hedge funds is the fact that even investors with less than mammoth bank balances can invest into them. Nowadays, various funds of funds are registered with the S.E.C., thus, offering more transparency and oversight than unregistered funds.
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