Fund of Funds: How Multi-Manager Investing Works in Singapore
A fund of funds is an investment fund that builds its portfolio by holding other funds, such as unit trusts or ETFs, rather than buying individual stocks and bonds directly, offering instant diversification across managers and strategies at the cost of an additional layer of fees.
Not financial advice. All figures for educational reference only. Data as at July 2026.
Last updated: July 2026
Key Takeaways
- A fund of funds (FoF) invests in a basket of underlying funds rather than directly in individual securities, offering diversification across multiple fund managers in a single product.
- Singapore investors commonly encounter fund-of-funds style structures through multi-fund robo-advisor portfolios, Endowus Flagship Portfolios, and certain investment-linked policy (ILP) sub-funds.
- Because a FoF layers its own fee on top of the fees already charged by each underlying fund, total costs can be higher than buying the underlying funds or ETFs directly.
- A FoF differs from a feeder fund, which invests substantially all its assets into a single master fund rather than a diversified basket of several funds.
- Checking both the FoF-level expense ratio and the weighted average expense ratio of its underlying holdings is necessary to understand the true total cost.
What Is a Fund of Funds?
A fund of funds is exactly what it sounds like: instead of a fund manager picking individual stocks, bonds or other securities directly, the manager instead selects and allocates across a basket of other funds, each of which may be managed by a different firm or follow a different strategy. This structure allows an investor to gain broad diversification, across asset classes, geographies, and even investment styles, through a single purchase.
The appeal of a fund of funds is largely about convenience and diversification for investors who do not want to research and select individual funds themselves. A single FoF might hold a global equity fund from one asset manager, a fixed income fund from another, and a specialist thematic fund from a third, all bundled and rebalanced according to a target asset allocation, without the investor needing to open separate positions in each underlying fund.
How Do Fund of Funds Structures Work in Singapore?
Singapore investors most commonly encounter fund-of-funds style structures in a few settings:
| Where You See It | How It Works |
|---|---|
| Robo-advisor managed portfolios (e.g. multi-fund allocations) | Client money is pooled into a portfolio of several underlying unit trusts or ETFs, rebalanced automatically according to a target risk profile |
| Multi-manager unit trusts | A single unit trust available on platforms like Endowus or FSMOne that itself invests in several other unit trusts across asset classes |
| Investment-linked policy (ILP) sub-funds | Some insurer sub-funds are structured as fund-of-funds, blending several underlying funds within a single ILP sub-fund option |
In each case, the investor pays a layer of fees at the top-level fund or portfolio, on top of the expense ratios already embedded in each underlying fund, so the effective total cost is the sum of both layers, not just the headline fee quoted for the top-level product.
Fund of Funds Example
Suppose a multi-fund portfolio charges a 0.50% annual management fee at the portfolio level, and it holds five underlying unit trusts with expense ratios averaging 0.80% each, weighted by allocation. The effective total cost to the investor is not just the 0.50% headline fee, but roughly 0.50% plus the weighted 0.80% average of the underlying funds, for a combined cost of around 1.30% per year. Over a 20-year investment horizon on a S$100,000 portfolio, that additional layer of underlying fund fees, if it had instead been avoided by holding the underlying funds or comparable low-cost ETFs directly, could compound into a meaningfully larger difference in ending portfolio value.
Advantages of a Fund of Funds Structure
- Instant diversification across managers. A single purchase can spread exposure across multiple fund houses and strategies, reducing reliance on any one manager\u2019s performance.
- Simplifies portfolio construction. Investors who do not want to research and select individual funds themselves can rely on the FoF manager\u2019s due diligence and allocation decisions.
- Automatic rebalancing. Many fund-of-funds and robo-advisor portfolios rebalance the underlying holdings periodically, saving the investor from having to do this manually.
- Access to funds otherwise hard to reach. A FoF can include institutional-class or otherwise less accessible underlying funds that individual retail investors might not easily buy on their own.
Risks and Limitations
- Double layer of fees. Paying a fee at both the FoF level and within each underlying fund can meaningfully erode long-term returns compared to a low-cost, direct ETF portfolio.
- Less transparency into individual holdings. It can be harder to see exactly what you own at the underlying security level compared to buying individual funds or ETFs directly.
- Manager selection risk moves up a level. Instead of picking individual securities, you are now trusting the FoF manager\u2019s judgement in selecting and weighting the underlying funds.
- Overlap risk. Underlying funds within a FoF can sometimes hold similar or overlapping securities, reducing the actual diversification benefit versus what the fund count alone suggests.
Fund of Funds vs Feeder Fund vs Direct ETF Portfolio
| Structure | What It Holds | Fee Layers | Diversification |
|---|---|---|---|
| Fund of Funds | A basket of several underlying funds across managers and strategies | Two: FoF-level fee plus underlying fund fees | High, across multiple managers |
| Feeder Fund | Substantially all assets in a single master fund | Typically one, passed through from the master fund | Same as the single master fund it feeds into |
| Direct ETF Portfolio | Individual ETFs selected and held directly by the investor | One: each ETF\u2019s own expense ratio | Depends on the number and type of ETFs chosen |
The Bottom Line
A fund of funds can be a convenient way to access broad, multi-manager diversification in a single product, but the extra layer of fees means it is worth comparing the all-in cost against simply building a similar allocation using low-cost ETFs or unit trusts directly, particularly for investors comfortable managing their own asset allocation.
Frequently Asked Questions
What is a fund of funds?
A fund of funds is an investment fund that builds its portfolio by holding other funds, such as unit trusts or ETFs, rather than buying individual stocks and bonds directly.
Where do Singapore investors encounter fund-of-funds structures?
Common examples include multi-fund robo-advisor portfolios, certain multi-manager unit trusts available on platforms like Endowus or FSMOne, and some investment-linked policy sub-funds.
Are fund of funds more expensive than buying ETFs directly?
Often yes. A fund of funds typically charges its own management fee on top of the expense ratios already embedded in each underlying fund, creating a double layer of fees compared to holding the underlying funds or ETFs directly.
What is the difference between a fund of funds and a feeder fund?
A fund of funds typically holds a diversified basket of several underlying funds across different managers, while a feeder fund invests substantially all of its assets into one single master fund.
Is a robo-advisor portfolio the same as a fund of funds?
Conceptually similar, though not always legally identical. Many robo-advisor portfolios function like a fund-of-funds structure by allocating client money across a basket of underlying ETFs or unit trusts, with fees charged at both the portfolio and underlying fund level.
How do I check the true cost of a fund of funds?
Look at both the fund-of-funds level expense ratio and the weighted average expense ratio of its underlying holdings, since the combined figure, not just the headline fee, represents the true total cost to the investor.