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A fund of funds (FoF) is a pooled investment fund that invests in other funds. Unlike a venture capital fund where the portfolio is made up of other companies, a FoF’s portfolio consists of other funds and their underlying portfolio. The fund manager could invest in hedge funds, mutual funds, private equity, real estate, or venture capital funds.
A fund of funds can be “fettered” meaning it only invests in funds held by the same management company or “unfettered” where it invests in funds held by any management company. Typically a VC fund of funds is unfettered due to the amount of capital. When deciding on funds, the FoF manager performs due diligence on other fund managers as opposed to individual companies. This typically involves looking into their asset class allocation, sectors, industry trends, and portfolio weighting.
For investors, this is highly attractive since they’re able to use capital that would have otherwise been limited to a few investments across multiple portfolios. The major value add to a fund of funds is that the LPs of the FoF are accessing two layers of professional expertise for identifying a strategy to allocate these investments. Brent Weiss, CFP, co-founder of Facet Wealth, says
In a sense, when you invest in a fund of funds, you’re “hiring a ‘general contractor” to complete research on other managers, balance overall risk and make sure the entire ‘project’ runs smoothly,”
A VC fund of funds may also invest directly into a portfolio company, along with other funds. In this way, they are avoiding the second layer of management fees. While also getting the assurance that another fund has already vetted the company.
Aldea Ventures is a pan-European venture capital platform based in Barcelona investing in the next generation of technology leaders. Aldea backs highly specialized emerging fund managers investing in early-stage companies and co-invest in growth-stage companies in their breakout paths.
Blue Future Partners is a day-one partner to emerging fund managers (GPs) globally, currently with investments across 15 startup hubs spanning 3 continents, incl. the US, Europe, Israel, and Asia-Pacific. We strive to provide meaningful value-add to our portfolio.
Backing Europe's VC champions early and doubling down on their breakout companies. We run multiple fund strategies to provide our LPs with access at every level of the venture value chain & our portfolio VCs & founders with the support they need to win.
Pacenotes is a hybrid fund investing in top-tier funds and co-investing in the winners of their portfolios to generate strong risk-adjusted returns. Pacenotes’ focus is on top-tier tech funds in Europe, Israel, and the US.
Multiple Capital democratizes access to a consistent, highly diversified, early-stage venture capital portfolio. They invest in a range of both generalized local funds and specialized sector funds.
Molten Ventures invest in Europe's tech leaders at Series A and beyond to make it more possible. The fund invests in leaders in DeepTech, Consumer Tech, Healthtech, SaaS, and Enterprise software.
Sapphire Ventures has invested in more than 170 companies globally resulting in more than 30 Public Listings and 45 acquisitions. The firm’s investment strategies are focused on scaling companies and venture funds, elevating them to become category leaders.
Northgate Capital manages approximately $4.8 billion in venture capital and private equity. They distinguish themselves through a partnership approach to supporting the rapid growth of smart, daring, and resilient companies looking to build global platforms.
Interested in learning more about the FoF structure? Check out these additional readings!