What is Fund of Funds (FOF)?

A Fund of Funds (FOF) – or multi-manager investment — is a pooled investment fund (made up of several mutual funds, hedge funds, private equities, and investment trusts) that is used to achieve wide diversification and proper asset allocation of investments in numerous fund categories within a single portfolio. These holdings can replace direct investing in stocks, bonds, or other security or investment types. FOF are generally classified as either "fettered," meaning that they can invest only in funds managed by the same investment firm, or "unfettered," meaning that they are able to invest in external funds run by other asset management firms.