FoF does not directly invest in stocks or bonds, and its investment scope is limited to other funds. Indirectly holding securities assets such as stocks and bonds by holding other securities investment funds. It is a new type of fund that combines fund product innovation and sales channel innovation.
On the one hand, FoF binds multiple funds together, and investing in FoF is equivalent to investing in multiple funds at the same time, but the cost of individual investment is greatly reduced;
On the other hand, unlike pure sales plans such as fund supermarkets and fund bundle sales, FoF completely adopts the legal form of funds and operates according to the operation mode of funds; FoF contains the long-term investment strategy of the fund market. Like other funds, FOF is a financial tool that can be invested for a long time.
In fund raising, FOF, as an LP sub-fund, has played a significant value-added effect, mainly in three aspects:
First of all, FOF is a long-term and stable source of funds. For the sub-fund, it is more willing to choose LP that can inject capital for a long time in the follow-up fund and establish a long-term cooperative relationship. As an LP focusing on the private equity market, FOF can usually inject capital into the sub-fund team with outstanding performance for a long time, regardless of the asset allocation ratio in the private equity market.
Second, FOF can establish a more optimized LP structure for sub-funds and ensure long-term stable funding channels. Different regions and types of LPs will adjust their asset allocation in PE market according to the changes of market and policy environment, so too single LP composition is a potential hidden danger to the stability of fund sources. The LP composition optimized by FOF itself can diversify the LP composition of sub-funds.
Third, the addition of FOF can usually shorten the fundraising cycle of sub-funds. As a professional investor, FOF has strong professionalism in due diligence, fund terms negotiation and long-term tracking of GP performance.
Therefore, it is a positive signal that the potential LP of the fund joins the FOF at the initial stage of fund raising, or serves as the lead investor of the fund, which is of positive significance for promoting the success of fund raising and shortening the fund raising cycle.
Baidu Encyclopedia-Fund in Fund