Fund of funds exist. They typically become LPs in PE funds and Hedge funds. Their value add is that they provide fund selection for sovereign funds / pensions / endowments that feel that they do not have the expertise to become LPs directly in the right funds (I find this value add to be bs, but I guess I'm unfamiliar with how clueless someone directing a random sovereign fund could be).

Larger VCs will become LP in smaller upstart ones to have better visibility into earlier stage companies [1].

[1] Bessemer, Emergence, Social, and Sapphire are LPs in Saastr Fund http://www.saastrfund.com/strategic-partners-1/