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What is the difference between a hedge fund and a fund of hedge funds?

April 26, 2017fund funds hedge

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What is the difference between a hedge fund and a fund of hedge funds?

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A hedge fund is an absolute return oriented fund which has its own portfolio of investments. A fund of hedge funds invests in a number of individual hedge funds and seeks to create a diversified portfolio of funds which will deliver comparable risk and return characteristics, but with a lower level of volatility.