sjóðasjóður

Sjóðasjóður is an Icelandic term that translates directly to "fund of funds" in English. It refers to an investment fund that invests in other investment funds rather than directly in underlying assets like stocks or bonds. The primary purpose of a sjóðasjóður is to provide diversification and professional management across a range of underlying investment strategies.

These funds are structured to pool investor capital and then allocate it to various specialized funds, each potentially focusing on different asset classes, geographical regions, or investment styles. By investing in multiple funds, a sjóðasjóður aims to reduce the risk associated with any single investment and potentially enhance overall returns. The management of a sjóðasjóður involves selecting the appropriate underlying funds, monitoring their performance, and rebalancing the portfolio as needed.

Investors in a sjóðasjóður benefit from immediate diversification without the need to research and select individual funds themselves. It can also be a more cost-effective way to access specialized investment strategies that might otherwise have high minimum investment requirements. However, it's important for investors to understand that investing in a sjóðasjóður incurs two layers of fees: the fees of the sjóðasjóður itself and the fees of the underlying funds it holds.