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A few investors would like to select a fund of hedge funds for investment. After doing some research they find two funds that they feel
A few investors would like to select a fund of hedge funds for investment. After doing some research they find two funds that they feel are attractive investments. The first one allocates its capital to hedge funds that specialize in investing in technology industry stocks. The second does not restrict the hedge fund's strategy in its selection of hedge funds, and only considers hedge funds that are suitable for its investors. Assuming that the two fund of hedge funds invest in the same number of hedge funds: 1. Describe in your own words two benefits and two disadvantages that you could experience when investing in a fund of hedge funds instead of another investment fund. (Worth 4 marks) 2. Explain in your own words the importance of manager selection to both of these funds. (2 marks) 3. Explain in your own words the benefits of looking at due diligence reports on both of these funds before making the final decision on which fund to invest in. (Worth 4 marks)
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