The prospectus of a fund of hedge funds SINGLE, LLC states that this FOHF allocates it capital only among hedge funds dedicated to investing in stocks of the technology sector. The prospectus of another fund of hedge funds MULTI, LLC states that this FOHF invests in hedge funds dedicated to any strategy that the fund may determine to be suitable for its investors. In theory, which of the two funds of hedge funds would need to invest in a larger number of hedge funds to obtain the same degree of diversification in its portfolio as the other FOHF? Explain your reasoning.

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In theory the fund of hedge funds FOHF with a more restricted investment mandate such as SINGLE LLC allocating its capital only among hedge funds dedi... View the full answer