Multi-asset fund of funds: a prime gateway to private markets
14.10.2026|8 min
As a tool for diversification, risk pooling and operational simplification, a fund of funds addresses a key challenge for investors: how can they gain access, through a single solution, to a range of strategies and leading managers without having to manage the technical complexity and selection process directly?
Multi-asset private markets fund of funds: definition
Let us begin by defining a fund of funds: an investment vehicle that invests in other funds. Unlike a direct investment fund, which may invest directly in companies’ equity, it is based on a selection of underlying funds. This makes it possible to select and combine different managers and strategies in order to build a diversified portfolio with specific risk and return profiles.
A multi-asset approach within a private markets fund of funds allocates capital across several private asset classes. These may include private equity and private debt, as well as certain real assets such as infrastructure and private real estate, with the aim of combining different sources of return and risk profiles.
The role of private markets in an asset allocation
The economic cycle exposes investors to recurring periods of volatility, driven in particular by geopolitical tensions and/or structural changes.
Against this backdrop, diversifying sources of return is essential. In our view, private markets can therefore serve as a particularly valuable complement within an asset allocation, offering several potential benefits:
- Enhanced portfolio diversification: historically, private market performance has generally followed a pattern distinct from that of equities and bonds. In addition, the various asset classes within private markets have generally exhibited low correlations with one another, further strengthening diversification potential.
- Access to complementary potential sources of return: private markets provide access to companies and assets that are not publicly listed, offering differentiated return potential that can complement listed-market investments.
- A contribution to financing the real economy: direct support for business development, contributing to innovation, job creation and, more broadly, economic growth. Private markets also help finance companies’ digital and environmental transformation by supporting their long-term investment and transition projects.
Broader access
For many years, private markets were difficult for individual investors to access due to high minimum commitments, long lock-up periods and the fact that leading managers were often reserved for institutional investors. The landscape is now changing. The entry into force of ELTIF 2.0, together with open-ended “evergreen” fund structures, has played a significant role in broadening access to these assets and expanding liquidity options for non-institutional investors:
Key developments introduced by ELTIF 2.0:
- Removal of minimum investment thresholds
- Fund-of-funds structures permitted, notably providing access to high-quality managers
- Evergreen structures permitted: subscriptions funded in a single payment, regular opportunities to enter and exit the fund, and no reinvestment risk
- Diversification: more flexible rules, allowing portfolios to be optimised
An open-architecture fund-of-funds approach: a ready-made solution for gaining exposure to the private markets universe
By investing in underlying funds managed by third-party asset managers through an open-architecture model, a fund-of-funds approach can build diversified exposure to private markets across several dimensions: best-in-class managers, strategies, sectors and geographies, thereby contributing to an optimised risk-return profile.
This approach may also offer the benefit of a multi-vintage allocation, meaning investments in funds launched at different points in time. In practice, capital may be invested progressively across several generations of funds deployed at different stages of the economic cycle. This time diversification can help reduce sensitivity to the market fluctuations inherent in private assets and support the optimisation of the fund’s liquidity management.
Limitations inherent in a fund-of-funds approach
This approach nevertheless entails certain constraints. The layering of investment vehicles may result in two levels of fees and reduce investors’ visibility over the assets held indirectly.
Fund performance also depends on the quality of the underlying fund selection and the allocation decisions made by the manager, without eliminating the risks of capital loss, illiquidity or valuation associated with private assets.
More broadly, a fund-of-funds approach provides simplified access to strategies traditionally reserved for institutional investors, helping to meet individual investors’ growing interest in private markets.
“The ability to combine different private market strategies and asset classes is a key driver of effective portfolio construction, offering investors greater diversification and new sources of return.”
– Irène d’Orgeval, Head of Capital Solutions, LBP AM European Private Market
The multi-asset approach: optimising the potential risk-return profile through complementary return drivers
Private markets represent a significant part of Europe’s economic landscape. Private equity, private debt, infrastructure and real estate are the main components of private markets. Their distinct and complementary characteristics make them important building blocks for robust investment strategies:
- Private debt: private debt generally offers high coupons, often above those available from traditional bonds, reflecting the lower liquidity and more specialised nature of loans originated outside public markets. It benefits from structural growth, as financing needs have increased in recent years. Private debt can be used to finance both companies and real assets, including infrastructure and real estate.
- Private equity: private equity encompasses investments involving the acquisition of ownership interests in unlisted companies, with a view to creating value over a medium to long-term holding period. The main categories generally include venture capital, growth equity, buyouts / LBOs (leveraged buyouts) and turnaround capital. It therefore provides exposure to unlisted companies with strong growth potential, particularly in emerging and innovative sectors, and gives investors an opportunity to participate in projects at the forefront of innovation.
- Infrastructure: infrastructure assets comprise investments in facilities and services that are essential to the functioning of the economy, such as energy networks (electricity and renewable energy), transport infrastructure (motorways and airports), telecommunications infrastructure (fibre networks and data centres), and social infrastructure (hospitals and schools). These assets generally feature high barriers to entry and the ability to generate stable and predictable cash flows, often underpinned by long-term contracts. They may therefore contribute to portfolio stability and offer potential protection against inflation.
A multi-asset approach to private markets can be a powerful source of diversification by combining several private asset classes. In particular, it provides access to a range of risk and return profiles.
In this context, an open-architecture multi-asset private markets fund of funds can provide investors with a ready-made solution. It offers a practical response to the main challenges associated with accessing private markets: operational complexity, manager selection, the need for diversification and minimum investment requirements.
By bringing together several specialised funds from different vintages within a single vehicle, it can pool risks, provide access to established managers and offer a diversified allocation constructed and managed by investment professionals. Through a single entry point, investors can therefore access the broad range of opportunities available across private markets.
Disclaimers:
Key risks associated with private assets: capital loss, risks related to investments in unlisted assets, illiquidity risk and an increased risk of financial distress resulting in a significant loss of value.
This document has been prepared by LBP AM strictly for information purposes. It does not create any obligation on the part of LBP AM. The information, data and opinions provided by LBP AM are valid as at the date indicated, are derived from sources considered reliable and reflect LBP AM’s analysis of the economic, financial, market and regulatory environment in the markets concerned. They are provided for information purposes only and do not constitute an offer to buy or sell any security, investment advice or financial analysis. No decision should be made, or refrained from being made, solely on the basis of this document.
This document does not constitute legal, tax or financial advice. Recipients should conduct their own analysis or seek advice from a professional adviser.
Before making any investment, whether new or renewed, investors are advised to consult a professional and/or investment adviser in order to assess its suitability. LBP AM shall not be held liable for any decision made on the basis of this document.