Fund of Funds (FoFs)

A Fund of Funds (FoF) aggregates capital from institutions, wealth platforms, and high-net-worth families and allocates it into external fund managers. Instead of underwriting companies or properties, FoFs underwrite manager selection: sourcing advantage, underwriting discipline, portfolio construction logic, pacing, risk controls, and governance.

The FoF mandate is not to identify “exciting markets.” It is to identify repeatable decision engines.

FoFs sit at the intersection of allocation and meta-analysis. They evaluate not only whether a GP produced strong returns, but whether those returns can be systematically reproduced across vintages—without dependence on favorable markets, one-time access, or individual heroics.

In practice, FoFs are often judged by their own LPs on three things:

• Whether their manager selection creates durable outcomes (not just one good vintage)
• Whether their pacing avoids concentration in the wrong cycle
• Whether their diligence process reduces avoidable downside and surprise risk

TL;DR

• FoFs give investors diversified private-market exposure by allocating to multiple managers and vintages
• They underwrite the GP’s process, not the GP’s story
• Investment committees reward repeatability, attribution clarity, and downside discipline more than headline IRR
• “What you don’t do” (exclusions, risk limits, pacing rules) is often more persuasive than what you do
• FoFs can back emerging managers when the strategy is scalable, governable, and explainable

How Funds of Funds fit into allocator portfolios

FoFs are typically used to access private markets with:

• Diversification across managers, strategies, and vintages
• Reduced idiosyncratic risk versus single-manager concentration
• Access to oversubscribed or capacity-constrained managers (where relationships and program access matter)
• A pacing framework that smooths entry timing across volatile macro regimes
• A defensible allocation approach that an LP committee can approve and monitor

FoFs can also serve as a “translation layer” for certain investor types—especially wealth platforms—because the FoF packages manager exposure into an institutional wrapper with standardized reporting and governance.

How FoFs evaluate managers

FoFs are not trying to predict markets. They are trying to evaluate judgment under uncertainty.

Conviction builds when a GP demonstrates:

• A repeatable sourcing engine that is structural (not luck, proximity, or brand-dependent)
• Selection discipline: clear reasons to say no, not just reasons to say yes
• Portfolio construction logic that actually governs behavior (pacing, concentration limits, reserves, ownership targets)
• Downside management: how losses are prevented, detected early, and handled when they occur
• Attribution clarity: what decisions drove outcomes, and what was outside GP control
• Team durability: institutional memory, decision-making continuity, and reduced key-person fragility

FoFs do not reward “activity.” They reward control of risk and clarity of process.

What slows FoF decisions

FoF diligence slows down when they see signals of process fragility, including:

• Thematic positioning that cannot be repeated without ideal market conditions
• Unclear exclusion rules (“we invest in everything”)
• A claimed sourcing edge that is personal-access dependent rather than structural
• Returns that appear lifted by the environment, without a defensible explanation of GP control
• Lack of transparency on losses, near-misses, or deals that didn’t work
• Weak reporting discipline or inconsistent communication cadence

A FoF committee is not asking, “Is this exciting?”

They are asking, “Is this reproducible?”

Common misconceptions about FoFs

• “FoFs don’t back emerging managers.”
  They do—when process quality is strong, governance is clear, and the strategy scales without decision drift.
• “FoFs care most about logos.”
  Logos can open a door, but they rarely close a committee. Process and attribution do.
• “FoFs only chase top-quartile IRR.”
  Many FoFs optimize for consistency, downside control, and durability—not peak outcomes.
• “FoFs move slowly because they lack conviction.”
  They move deliberately because their diligence is governance-driven, and their own LPs demand defensible underwriting.

Key allocator questions during due diligence

• Where does your edge originate—sourcing, evaluation, or portfolio construction?
• How do you preserve decision quality as AUM and team size scale?
• What is your loss-handling playbook—detection, intervention, and governance?
• How do you avoid vintage concentration in overheated markets?
• What parts of your strategy are designed to survive tight liquidity and weaker exits?
• What evidence suggests you can repeat past outcomes across future cycles?