Can someone explain what a Private Equity Fund of Funds is?
- 1 decade agoBest Answer
Private Equity Funds are pretty simple in nature. Basically they operate as follows:
You and 20 friends each put in some money to a pot. Let's say you each put in $10,000.
Then you take that money and start investing it in companies (buying shares of publicaly traded companies, and investing as an owner in various smaller companies)
That is basically a Private Equity Fund.
A private Equity Fund "of Funds" basically means that you and your friends instead of investing in stocks like Walmart, etc - go to other equity funds and give them chunks of your money. Basically meaning you go to other people's pots of money and put $10,000 into their pot of cash and let them invest accordingly.
Since funds typically have an investment strategy (some are high risk, or some are related to specific sectors) by investing into a whole bunch of Pirvate Equity Funds you get a nice spread of risk.