Funds of Funds' Portfolio Composition and its Impact on Performance: Evidence from the Italian Market

18 Pages Posted: 27 Feb 2005

See all articles by Alessandro Carretta

Alessandro Carretta

University of Rome Tor Vergata - Faculty of Economics

Gianluca Mattarocci

University of Rome Tor Vergata - Department of Management and Law; University of Rome Tor Vergata - Department of Management and Law

Date Written: November 2005

Abstract

Funds of Funds (FoF) are particular investment funds that invest resources in some mutual funds. This type of funds offers the possibility to achieve an higher diversification that an investor can't realize using other instruments.

One of the main differences among FoFs available is the strategy adopted by the manager to select the investment funds to include in the portfolio and the number of funds included in the portfolio. The funds' selection could be naïf or based on some aspect related to the funds' history as the past performance achieved, the fund's investment style or the manager's reputation.

This paper analyses FoF's Italian market and verifies whether the performance is influenced by either the diversification strategy or the number of funds included in the portfolio. The analysis demonstrates that FoFs' best performers are those which are less geographically or sectorially concentrated; there are significant differences following different criteria/constraints applied in the funds' selection.

Keywords: Funds of Funds, Diversification strategy, Portfolio composition

JEL Classification: E44, G11

Suggested Citation

Carretta, Alessandro and Mattarocci, Gianluca, Funds of Funds' Portfolio Composition and its Impact on Performance: Evidence from the Italian Market (November 2005). Available at SSRN: https://ssrn.com/abstract=674421 or http://dx.doi.org/10.2139/ssrn.674421

Alessandro Carretta

University of Rome Tor Vergata - Faculty of Economics ( email )

Via Columbia n.2
Rome, rome 00100
Italy

Gianluca Mattarocci (Contact Author)

University of Rome Tor Vergata - Department of Management and Law ( email )

Via Columbia n.2
Roma, 00133
Italy
+390672595903 (Phone)
+39062040219 (Fax)

University of Rome Tor Vergata - Department of Management and Law ( email )

Rome
Italy

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