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Alternative Investments Q11

0. Which of the following statements is most likely to be correct about funds of funds? Statement I: Funds of funds are funds that hold a portfolio of hedge funds. Statement II: Funds of funds presumably have some expertise in conducting due diligence on hedge funds. Statement III: Funds of funds may be able to negotiate better redemption.

  • Option : C
  • Explanation :

    • Statement I is correct – Funds of funds invest in a variety of hedge funds, giving investors diversified exposure.

    • Statement II is correct – Since they manage multiple hedge fund investments, they conduct due diligence on the underlying hedge funds.

    • Statement III is correct – Due to their larger investments, funds of funds can negotiate better terms, including more favorable redemption options.

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