Mutual funds offer investors professional management—that is, investors benefit from the decision-making and monitoring of seasoned investment experts. For many investors, this represents a superior alternative compared to making decisions on their own.

The traditional mutual fund structure focuses on a specific asset class, like large-cap U.S. stocks or developed-market government bonds, for example. This relatively narrow emphasis enables investment professionals to focus their research and expertise with the rationale that they should be able to produce better results through specialization.

Multi-manager or manager-of-managers strategies combine several strategies run by different third-party managers into a single mutual fund for the same fundamental reason: specialization should be expected to have a beneficial bearing on performance.

A substantial difference exists between multi-manager strategies and the fund-of-funds model; both have a top-level fund structure, but a fund-of-funds invests in other commingled funds, which is distinct from the direct hiring of third-party sub-advisors.

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