Do funds of funds make sense?

Abstract

A popular discussion in the investment industry is whether funds of funds make sense, but there is little recent research available. A survey was set up to compare the net of fees performance of funds of funds and their single fund counterparts over a period of five years. The comparison was made within the international equity asset class, based on a fund database that is representative of the European market. Based on that research, it is obvious that funds of funds do not generally underperform their single fund counterparts. They even performed significantly better over the last three years, which indicates that funds of funds really make sense.