The market for funds of funds is really a tale of two cities. The larger funds of funds are struggling to raise capital, because some LPs are trying to cut back on management fees and can more easily invest in the larger market without the help of a fund of funds funds, which are raised to invest in larger and/or difficult-to-invest-in private equity funds. However, in the mid- to lower- fund-of-funds market, that's simply not the case.

747 Capital's Josh Sobeck reports good reception to his firm's smaller, niche-focused fund of funds. "Funds of funds that offer something unique or compelling for the LPs that don't have an in-house ability to make those investments directly are doing very well," says Sobeck.

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