Fund of Funds (FOF)
What is a Fund of Funds (FOF)?
A fund of funds is a fairly self-explanatory entity, it is any form of fund (usually mutual) which invests in other funds as a means of diversification. This is essentially one level of risk removed from being a standard fund, as you would assume that the funds the FoF invests in are themselves diversified for reduced risk. The return of a FoF is likely to be lower than could be achieved in a standard fund.
Funds of funds will usually invest into a diverse set of hedge funds and private equity funds in order to attempt to reach high levels of returns.