As more and more investors realise that not only picking stocks and fund managers is a losers game, they turn to another set of even more powerful managers and advisors; the ones running so called funds of funds (FoF).
A fund of fund will not try and pick winning stocks, but instead attempts to find the next winning fund manager.
Well there is not really much to say about this folly. As little as anyone else can such a manager pick the next fund that outperforms the market, but he or she will sure as sheep in Ireland add another management fee onto the pile of costs, thus further reducing the investors return.
Just to stress this point a little further: If a FoF chooses funds with an average management fee of 1.5% and will add another say 1.5% of its own cost to on top of that, it will have to outperform the market by a massive 3% just to draw even. No way.
Another point that should discourage anyone from buying funds of funds should be the following: A FoF manager of a Bank A will have a fair bit of pressure to buy fund-shares of funds run by the very same bank, as this way two sets of management fees flow into the coffers of the above mentioned bank A. Buying funds from a bank B would mean loosing some of that income, something no bank in the world readily does. To verify just check the holdings of a FoF, and also check the percentage all the funds in comparison to the total funds holdings. (This might be quite difficult, but you can try) Also be aware that many banks have quite a few subsidiaries that might not actually carry the same name as the bank itself.