Manager of managers fund
Encyclopedia
A "manager of managers fund" (MoM fund) is an investment fund
that uses an investment strategy of directly selecting different investment managers and gives them mandate to make investment decisions. This is different from the traditional mutual fund
where only one manager invests the fund capital in stock
, bond (finance)
or other investment vehicles. MoM fund is one type of multi-manager investment
. The other type is fund of funds
.
The assumption underpinning MoM is that diversification and balance can be achieved more readily by having a group of specialists, instead of one individual, investing the fund's capital. This means that the role of the manager of managers is to assemble a group of investment experts, closely monitor their performance, and alter the composition of the team to adapt to market conditions or fund performance. For example, the manager of a large pension fund would appoint different investment managers for different asset classes such as equities (stocks), bonds, and commodities. The performance of those managers will then be measured against their respective benchmarks
, replacing as necessary to maintain the fund’s overall performance and risk control measures.
Collective investment scheme
A collective investment scheme is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group...
that uses an investment strategy of directly selecting different investment managers and gives them mandate to make investment decisions. This is different from the traditional mutual fund
Mutual fund
A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors to buy stocks, bonds, short-term money market instruments, and/or other securities.- Overview :...
where only one manager invests the fund capital in stock
Stock
The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...
, bond (finance)
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
or other investment vehicles. MoM fund is one type of multi-manager investment
Multi-manager investment
Multi-manager investment is an investment product that consists of multiple specialized funds. Each specialized fund may invest across different sectors and markets, or having managers investing in the same asset class but have different investment styles...
. The other type is fund of funds
Fund of funds
A "fund of funds" is an investment strategy of holding a portfolio of other investment funds rather than investing directly in shares, bonds or other securities. This type of investing is often referred to as multi-manager investment...
.
The assumption underpinning MoM is that diversification and balance can be achieved more readily by having a group of specialists, instead of one individual, investing the fund's capital. This means that the role of the manager of managers is to assemble a group of investment experts, closely monitor their performance, and alter the composition of the team to adapt to market conditions or fund performance. For example, the manager of a large pension fund would appoint different investment managers for different asset classes such as equities (stocks), bonds, and commodities. The performance of those managers will then be measured against their respective benchmarks
Benchmarking
Benchmarking is the process of comparing one's business processes and performance metrics to industry bests and/or best practices from other industries. Dimensions typically measured are quality, time and cost...
, replacing as necessary to maintain the fund’s overall performance and risk control measures.
See also
- Collective investment schemeCollective investment schemeA collective investment scheme is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group...
s - Investment managementInvestment managementInvestment management is the professional management of various securities and assets in order to meet specified investment goals for the benefit of the investors...
- Fund of fundsFund of fundsA "fund of funds" is an investment strategy of holding a portfolio of other investment funds rather than investing directly in shares, bonds or other securities. This type of investing is often referred to as multi-manager investment...