As their name implies, Funds-of-Funds invest in other funds – typically Venture Capital and/or Private Equity funds. By investing in many funds, each with their own portfolio, Funds-of-Funds offer greater diversification than individual funds might.
However, the underlying funds could have overlapping investments, reducing the apparent diversification and potentially causing overweighting of some assets or asset classes. Some Funds-of-Funds invest solely in blockchain-specific VC and PE funds; others invest in funds that are more broadly diversified – limiting their exposure to blockchain investments.
Though Funds-of-Funds often require a lower minimum investment than stand-alone VC and PE Funds, there are often two layers of fees: for the fund itself and for the funds that the fund invests in. Investors choosing Funds-of-Funds believe the fees are justified by the low investment amount, the extensive diversification provided by the fund and the convenience of owning one fund instead of buying funds separately.
Opportunities From These Leading Firms
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Protocol Ventures has strong relationships with the top hedge fund managers in highly liquid crypto assets, SAFTs and blockchain/crypto-related equity. The fund aligns with fund managers who have a deep technical understanding of blockchain technology, asymmetric knowledge and vision of the industry, a network of respected leaders worldwide, a value-add approach to the ecosystem and a clear and differentiated investment thesis.
Hutt Capital partners with venture firms to provide diversified exposure to the most globally promising blockchain and digital assets startups through fund, secondary, and direct investments. It offers long-term global exposure to blockchain innovation with a lower level of risk and volatility vs. other strategies within the crypto category.
Blockchain Coinvestors is an open-ended liquid fund. It manages a bundle of blockchain funds as well as equity investments that include Coinbase. It was the first blockchain fund-of-funds.
Accolade Partners specializes in a concentrated portfolio of hard-to-access funds across the venture capital and growth equity landscape.
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