morph366

Fund-of-Funds Model is 'Broken'? That Negates the Whole Point

Other than the inability of the fund managers to do their due diligence properly there is a more fundamental problem with the Fund of Funds concept. It exposes the severe limitations of the diversification model that was pioneered by Markowitz. In "normal" conditions one can exploit the fact that some asset prices will have low correlations with other asset prices, but In times of crisis the covariance across asset classes - or the co-movement of many asset prices - tends to converge on one as liquidity evaporates