Do Funds of Funds of Hedge Funds Make Sense?
When I first heard about Funds of Funds of Hedge Funds, I thought there was something uncomfortably familiar about the terms and concepts, something along the lines of financial Dj vu. The problem with Funds of Hedge Funds, according to DAuriol Asset Management, which advocates such an approach and, perhaps incidentally, an extra layer of fees, is that there are just too many of them, over a thousand by their count. In return for that extra layer of fees, you avoid the hard work of selecting fund of hedge fund managers; theyll do it for you. Recall that this is also the argument for the second level of fees; the second level allows you to avoid the hard work of selecting hedge fund managers. If a third level of fees is wrong, and most fund of fund managers believe it is, why, exactly are two levels of fees OK or even one? If three levels of fees are OK, what is wrong with four? The problem here is not with the number of levels of fees. The problem is more basic than that. The problem i
