Volatile flows of Fofs can hurt performance

fund of funds

Managers impeded from investing large sums of money in less liquid markets

Advisers are growing increasingly concerned over several popular funds experiencing heavy inflows and outflows from fund of fund (Fof) managers, unbalancing managers' strategies. The feeling is that Fofs making asset allocation calls are following each others' moves and the resulting volatile flows are damaging the performance of some single-manager funds. These flows can inflate funds to unmanageable sizes and, especially in the case of strategies exploiting opportunities lower down the market cap scale may impede managers from investing large sums of money in less liquid markets. Co...