Fund of Funds

A Fund of Funds, by definition, is one that invests in other hedge funds. Rather than investing in individual securities, a Fund of Funds invests in other hedge funds. Any fund that pools capital together, while utilizing two or more sub managers to invest money in equity, commodities, or currencies, is considered a Fund of Funds. Investors are allocating assets to Fund of Funds products mainly for diversification amongst the different managers' styles, while keeping an eye on risk exposure.

Fund of Funds are structured as limited partnerships, which afford advantages to the investor. One is advantage is due diligence. Due diligence is a primary advantage because the fund of funds manager may spend his whole day evaluating strategies and speaking with individual fund managers. This would be an extremely hard task for an individual. The fund of fund also may combat risk by achieving manager diversity, because of the different strategies employed by the underlying managers. For example, some fund of funds may have exposure to a long/short fund, a distressed fund, and a private equity fund. By investing within the fund of funds, the investor is given the opportunity to have a unique asset allocation product, while trying to limit the risk on the downside.

Fund of Funds have some drawbacks however. The first to come to mind is the double layer of fees. When dealing with fund of funds, an investor must understand that the underlying funds charge a fee, as well as the fund of funds manager. This translates to "layers" of fees before the investor receives dollar one. Transparency issues are also important. Research such as the individual manager's background and reputation, not to mention the nature of the investments that they are utilizing, are all issues a fund of fund manager must investigate. Therefore, you are relying on the fund of fund manager's talent and expertise in choosing managers, when investing in a fund of funds. Investors look for Fund of Fund because hopefully they provide more stable returns while reducing risk.

 

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Alternative investments are suitable only for qualified persons and organizations that have substantial financial means to make a long-term investment, can bear the risk of loss in their investments in the fund and have no need for liquidity in their investment. There is no market for such investments and none is expected to develop. Prior to investing in any alternative investment, each prospective investor should ask questions and receive answers from the Fund Manager or its representative concerning any aspect of the investment and its proposed business, and obtain any additional related information to the extent the Fund Manager possesses such information or can acquire it without unreasonable effort or expense. In making an investment decision, prospective investors must rely on their examination of an alternative investment product, the terms of the offering including the merits and risks involved. Prospective investors are urged to request any additional information they may consider necessary in making an informed investment decision. A prospective investor should not subscribe for the interests unless satisfied that it and its investment representative (if any) have asked for and received all information, which would enable them to evaluate the merits and risks of the proposed investment. Any prospective investor into any alternative investment should consult with its own counsel and accountant for advice concerning the various legal, tax and economic considerations relating to the prospective investment.

Last Atlantis Capital Management, LLC is a member of the NFA. The company offers various alternative investments, including hedge funds and managed accounts, which may invest in commodity and foreign markets, among others. The company and/or its officers/partners may have a financial interest in such alternative investments.

PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS WHEN INVESTING IN MANAGED FUTURES OR FUNDS.