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ARTICLE · 27 APRIL 2022

Funds Of Funds As A Tool For Creating Liquidity

Castrén & Snellman
Castrén & Snellman
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In recent years, the previously rare funds of funds have become more common as a way to create liquidity in close-ended funds. Funds of funds enable the realisation of ...

FinlandFinance and Banking
Antti Vepsä
Antti Vepsä

In recent years, the previously rare funds of funds have become more common as a way to create liquidity in close-ended funds. Funds of funds enable the realisation of an investment in such a manner that the fund manager retains control and has the possibility to benefit from a potential future increase in value of the investment object. In this post, I present some central special characteristics of funds of funds that fund managers and investors should keep in mind.

What Are Funds of Funds?

In a typical fund of funds transaction, a fund of funds purchases one or several investment objects in a fund that is managed by the same fund manager and often near the end of its term. Investors of the existing fund have the option to either sell (i.e. redeem) their investment or to transfer it to the fund of funds. Completely new investors pay their commitments to the fund of funds, which provides liquidity for those investors of the existing fund that have decided to

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