What is a fund of funds?

A fund of funds invests a substantial portion of its assets (generally 40% or more) in collective investment securities issued by other funds.

To prevent excessive concentration in a single fund or in the funds of a single asset manager, the FSCMA sets investment limits, for example allowing up to 20% in a single fund and up to 50% in funds of the same asset manager. The managers of the underlying funds may differ from the manager of the fund of funds.