1. A positive answer: Fund of Hedge Funds (FoHF) is a combination of hedge funds. It avoids the high volatility problem of traditional funds, provides a hedging function, and can achieve relatively stable expected annualized expectations.

income.

2. Detailed analysis Because of its stable performance, hedge fund funds of funds provide a good asset allocation platform and become a powerful tool for global asset allocation.

3. The composition principle of a hedge fund of funds: Here, we take Spring Hill Capital’s hedge fund of funds—“Blue Fund”—as an example to illustrate its basic composition principles.

First of all, when selecting investment targets, blue funds follow the principle of low correlation (or non-correlation) in order to reduce the overall risk of the investment portfolio. Only when the correlation with other funds in the portfolio is very low may they be accepted.

This point is very important.

Secondly, the construction of the fund of funds' investment portfolio is related to its judgment of the general trend. The judgment of the general trend over a period of time determines the allocation ratio of the blue fund in each sub-fund and each investment strategy.

This judgment ability is one of the core competitiveness of excellent fund of funds.

For example: when the market trend is unclear and sideways occurs, funds with long-short strategies usually perform well; in this case, event-driven funds based on behavioral finance will also perform well.

Third, when making specific allocations, Spring Mountain Capital selects 20-25 funds from more than 5,000 hedge funds around the world that invest in different industries, regions and different financial products to establish a diversified fund that meets investors' asset allocation goals.

portfolio.

Among them, the basic allocation is 6-8 large-cap funds.

Its characteristic is that the rate of return is not high but very stable, accounting for about 30%, playing a cornerstone investment role; the middle layer is 15-16 small and medium-cap funds.

Their characteristics are that they are small in scale, but very flexible and have large room for growth. They are rising star fund companies, accounting for about 40%; in addition, the allocation is some event-driven special situation funds, as well as when the market drops sharply.

The short-selling mechanism fund that can play an insurance role accounts for about 30% of the investment.

Therefore, for investors, investing in a good fund of funds is like investing in a basket of excellent hedge funds with lower volatility.

An excellent fund of funds must pass the triple test of investment portfolio structure, investment target selection and specific allocation. This also places higher requirements on the fund of funds managers' judgment of the general trend, risk control, product resources and other aspects.

What standards to use, which investment targets and investment strategies to select, and what allocations to make are also core factors in measuring the competitiveness of FOFs.