FOFs, or fund of funds, are a widely developed investment instrument globally, including in Brazil. The goal of this study is to evaluate the performance of equity FOFs in Brazil by assessing it through three methodologies and three different views of the sample. The first, composed of panel regressions, aims to identify the determinants of returns and value creation of FOFs. The second identifies the probability of FOFs outperforming mirror and master funds. Using logit regressions, the study seeks to identify the determinants of these probabilities. Lastly, FOF indices were constructed and their performance, return determinants, and market timing ability were analyzed in comparison with BOVA11 ETF, the most liquid in the Brazilian market. This paper contributes by clearly defining FOFs because of observation of fund portfolios. The final sample comprises 3350 stock funds, of which 307 are equity FOFs, 1242 Master funds and 1801 Mirror funds. These funds are managed by a total of 404 asset managers, of which 89 are FOF managers. The analysis period is between 12/31/2013 and 12/31/2023, 10 years of data. The results show that overall, on average, FOFs have a lower return and performance measured by the Sharpe ratio than the others. Fama-French and Carhart factors, together with exchange rate exposure, and the management fee charged being the main determinants of the return. The probability of FOF having a higher return than other equity funds is less than 50%. However, it is possible to construct index or FOF strategies that outperform passive investing such as a general market index ETF, but do not have market timing skill.
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