Fund of hedge funds: implementation and operation

Abstract

Hedge funds are an interesting investment alternative for those seeking international diversification. However, the task of analyzing and selecting a hedge fund to invest in is a very demanding one for the average investor. A fund of hedge funds is also an interesting alternative for those seeking international diversification through hedge funds. It is a specialized product of fered by some investment companies. Its objective is to maximize the expected return-risk ratio by diversifying the clients' investments in a portfolio of hedge funds. Our objective in this article is to discuss implementation and operational details related to funds of hedge funds. Our discussion will address important practical questions for both investors and investment companies.