I am thinking about career path in FOF. To an outsider like me, I find it difficult for a fof investor to develop unique value add or differentiation from other fof investors. I read on this site that fof is a declining business with margin compression, which shows FOF business doesn't seem to deliver much value. Is my understanding correct? Is FOF still a good career path?
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What attracts you to the FOF model? There are still use cases, and I think it is possible for a FOF to create alpha within a certain niche. For example, an LP may invest directly in buyout funds with its in house staff, but it would still use a FOF to execute a strategy such as life sciences or AI-focused VC funds.
Have you considered strategies like GP-centered secondaries or co-invest funds?
A FoF investor is not going to be value adding anything. FoF is an LP.. you’re passive money (I was an LP too). You get periodic updates. Depending how important you are to the fund, you have limited social capital to even big them with (ie, if you’re a small investor and there are plenty of alternative LPs, they may not give you much attention at all). Overall I liked being an LP a lot but it’s not value add
Are you in buyout now - how did you make the move if you can share?
No I didn’t go to a direct investing firm. I went to bschool after FoF
But for players like Harbourvest, Hamilton Lane, GS AIMS etc, they are charging LPs for fund allocation right? Why would their business work? Do you think they are in a declining business?
Because they don't have the capability to allocate capital themselves or they have too much capital that they can't manage all of them on their own?
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