TY  - JOUR
AU  - Ang,Andrew
AU  - Rhodes-Kropf,Matthew
AU  - Zhao,Rui
TI  - Do Funds-of-Funds Deserve Their Fees-on-Fees?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13944
PY  - 2008
Y2  - April 2008
UR  - http://www.nber.org/papers/w13944
L1  - http://www.nber.org/papers/w13944.pdf
N1  - Author contact info:
Andrew Ang
Columbia Business School
3022 Broadway 413 Uris
New York, NY 10027
Tel: 212/854-9154
Fax: 212/662-8474
E-Mail: aa610@columbia.edu

Matthew Rhodes-Kropf
Harvard University
Harvard Business School
Rock Center 313
Soldiers field Road
Boston MA 02163
Tel: 617-496-3911
E-Mail: mrhodeskropf@hbs.edu

Rui Zhao
BlackRock
E-Mail: Rui.Zhao@blackrock.com
AB  - Since the after-fee returns of funds-of-funds are, on average, lower than hedge fund returns, it is easy to conclude that funds-of-funds do not add value compared to hedge funds. However, funds-of-funds should not be evaluated relative to hedge fund returns in publicly reported databases.  Instead, the correct fund-of-funds benchmark is the set of direct hedge fund investments an investor could achieve on her own without recourse to funds-of-funds.  We use asset allocation concepts to estimate characteristics of the fund-of-funds benchmark distribution. Since the benchmark characteristics are reasonable, we conclude that funds-of-funds, on average, deserve their fees-on-fees.
ER  -