Managed Funds and Fund of Funds

Starting your own fund of funds portfolio
By Felicia R. Blue So you’ve decided to open up a fund of funds business. Your expertise and background have been in investing in mutual funds and you have been successful in producing high-yield returns. Now, you’re ready to move into the fund of funds field. One major reason you want to move into this field is that you're looking to allocate a part of your portfolio into an alternative asset program.
 

Since you’re new to the field, you should gradually move into the area, rather than jumping into it full force. Before investing or trading in fund of funds, do the following:

1. Track your fund management portfolio with fund of funds software.
2. Trade index funds first.
3. Invest in large fund of funds.

Use funds of funds software to track your fund management portfolio

Using fund of funds software will save you time so that you can focus on your investment objectives. The fund management portfolio software enables you to centrally store all of your data and documents, rather than having to use numerous spreadsheets or applications. The funds of fund software allows you to manage a portfolio of a fund of funds business manager and study the research of the fund of funds management.
Try: Backstop Solutions Group fund of fund’s software is simple to use. The web-based application contains a portfolio management feature component, where you can manage your income and expenses. You’ll also want to check out FrontVenture Fund of Fund software made by eFront. With FrontVenture, you can customize the application according to what you need, and add on capabilities as you need them. You can monitor investment projects and work flow, among other functions.

Use money from your funds of funds account to trade index funds

Trading index funds, which are managed funds, is a wise move because it gives you leverage. For one, you don't need to put up a lot of money to invest in individual securities. You can purchase the index fund as easily as a stock. Another advantage to trading in index funds is that they don't have zero value. On the other hand, if you invest in a company's stock that loses value, you will lose, too. You can still yield high returns, regardless if the market is up or down. These professionally managed funds are relatively conservative.
Try: Rydex is one of the largest fund of funds in the market. The Rydex Venture 100 invests in leveraged instruments, including futures, contracts, options, and others. You’ll also want to look at the UltraShort NASDAQ-100 ProFund, weighted toward the NASDAQ-100 Index.

Invest a portion of your portfolio in the largest fund of funds

You should consider investing in the largest fund of funds. Like index funds, you can protect your portfolio against a lot of volatility. These managed funds and fund of funds have a highly talented investment team of experts who do not let the emotions of the market's ups and downs sway them. Instead, these experts focus on the fundamentals of the market.
Try: Vanguard STAR fund consists of both domestic and foreign funds, in addition to short and long-term funds. Vanguard is one of the largest mutual fund companies, and many corporations have opened 401(k) plans to invest in Vanguard’s mutual funds. Also take a look at Pacific Life Insurance Company’s Portfolio Optimization Funds. Portfolio Optimization Funds offer five Asset Allocation funds you can choose from.

• Watch your expenses as you invest in the fund of funds. It's important that you keep them as low as possible.