What is a fund of funds (FOF)?

Prepare for the CSI Investment Funds in Canada exam with flashcards and multiple choice questions. Gain insights through hints and explanations for a successful exam experience!

A fund of funds is an investment vehicle that puts its money into a portfolio of other funds rather than directly into individual securities. The idea is to achieve broader diversification by accessing multiple funds that may cover different asset classes, regions, or investment styles, often with professional management of the overall mix. Because the fund of funds layers one set of fees on top of the fees charged by the underlying funds, total costs can be higher, which can affect net returns. This setup is not about investing in a single bond, holding only cash, or trading commodities for short‑term gains; its defining feature is investing in other funds to gain diversified exposure.