Charlie Jadallah and Darwin Ventures: The Fund of Funds Advantage
Charlie Jadallah, A partner with Darwin Ventures in San Francisco, breaks down the details of a fund of funds. This specific investment strategy involves a portfolio with a different set of underlying assets. At Darwin, the gains of a professionally managed suite of assets are inherent in a venture capital fund of funds.
Working with The fund of funds (FOF) strategy, the SEC began requiring that fees be fleshed out in a section called "Acquired Fund Fees and Expenses" (AFFE). Historically one of the higher performing assets within the venture capital asset class. Investing in a FOF gives the investor professional financial management services. Individual investors face the hurdle associated with minimum investment requirements. Institutional investors face the administrative burdens of making various investments. We mediate these obstacles by enabling investors to scale-up or down. investors can be paying double for an expense that is already included in the expense figures of the underlying funds.
Venture Capital investing requires due diligence and experience with investors that understand due-diligence laws and regulations. It's about industry experience, deep legal knowledge and tax work. Otherwise investors must spend a significant amount of time developing and keeping relationships with several VC firms. We provide regular outsourcing of admin and security professionals.
The goal is broad diversification across many fund groups and categories, and investment in an appropriate asset class. Historically, a fund of funds showed an expense figure that didn't always include the fees of the foundationary funds.