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Overview
A Fund of Funds, commonly called an FoF, is a mutual fund that primarily invests in units of other mutual funds or eligible investment funds instead of building its entire portfolio by directly buying individual stocks or bonds.
Fund of Funds can provide access to domestic equity, debt, hybrid, international, commodity, passive, or multi-asset strategies depending on the scheme mandate.
The category can make diversification and portfolio construction easier, but investors need to understand the underlying funds, total costs, asset allocation, and tax treatment before investing.
Explained
A Fund of Funds creates a portfolio by investing in other funds.
For example, instead of directly buying shares of 30 companies, an equity-oriented FoF could invest in one or more equity mutual fund schemes.
A commodity FoF may invest in units of a gold or silver ETF rather than directly holding the underlying metal.
Depending on the mandate, a Fund of Funds can invest in:
The underlying portfolio determines the fund's real economic exposure.
Explained
When you invest in a Fund of Funds, your money first enters the FoF.
The FoF then invests that money into one or more underlying schemes according to its investment objective.
For example, a hypothetical asset-allocation FoF might divide its portfolio between an equity fund, a debt fund, and a gold ETF.
The investor owns units of the FoF rather than directly owning units of every underlying scheme.
Returns ultimately depend on the performance of the underlying funds, adjusted for expenses, portfolio allocation, rebalancing, cash positions, and other scheme-level factors.
If an underlying fund performs poorly, it can reduce the FoF's overall return.
Yes, depending on the strategy.
An asset-allocation FoF can shift money among underlying funds as their weights change or as the fund's allocation framework generates new signals.
This can simplify portfolio rebalancing for investors.
Suitability
Fund of Funds may suit investors who:
Investors should evaluate the actual strategy rather than assuming all FoFs have similar risk.
Advantages
An FoF can invest across several underlying schemes, managers, asset classes, or markets.
The FoF manager selects and monitors underlying funds according to the investment mandate.
Multi-asset FoFs can combine several investments within one portfolio.
FoFs can provide convenient access to international equities, gold, silver, ETFs, and other eligible strategies.
Some FoFs rebalance between underlying funds, reducing the need for investors to manually manage several separate investments.
Before you invest
The FoF label alone tells you very little about risk. A global equity FoF and a domestic debt FoF can behave completely differently.
The FoF itself has expenses, while the underlying funds also incur their own expenses. Investors should consider the overall cost structure.
If several underlying funds own the same securities, apparent diversification may be greater than actual diversification.
The FoF manager's decision about which funds to hold can materially affect performance.
International FoFs can be affected by changes in foreign currencies against the Indian rupee.
Gold, silver, and other commodity-oriented FoFs can experience significant price fluctuations.
Fund of Funds cannot be assigned one universal tax treatment. The applicable tax rules depend on the structure and underlying exposure of the individual scheme.
Taxation
A domestic equity FoF, debt-oriented FoF, commodity FoF, international FoF, and multi-asset FoF may not receive identical capital-gains treatment.
Relevant factors can include:
Investors should verify the current tax classification of the specific FoF before investing or redeeming rather than assuming it is taxed like its underlying assets.
Step by step
Good to know
A Fund of Funds is a mutual fund that invests primarily in units of other eligible funds rather than directly building its entire portfolio from individual securities.
No. An FoF can invest in ETFs, but investors buy units of the FoF itself. ETFs are generally traded on a stock exchange.
Yes. Certain FoFs can provide exposure to overseas funds or international markets, subject to the scheme mandate and applicable regulatory limits.
They can be, but diversification depends on the underlying holdings. Several funds can still own many of the same securities.
They can involve expenses at the FoF level as well as costs within the underlying schemes. Investors should review the disclosed expense structure.
No. Tax treatment depends on the individual FoF's structure and underlying exposure.
A gold FoF can invest in eligible gold ETF units, allowing investors to obtain gold-related exposure through a mutual fund structure.
Recap
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FUND
Nippon India Nifty Next 50 Junior BeES FoF Direct GrowthHybrid Fund of Funds₹26.63
2.46%
3.45%
15.81%
10.92%
HSBC Multi Asset Active FOF Growth DirectHybrid Fund of Funds₹44.74
0.31%14.68%
15.13%
12.32%
Kotak Multi Asset Omni FOF Direct GrowthHybrid Fund of Funds₹279.37
0.74%8.48%
15.05%
14.97%
I
ICICI Prudential Diversified Equity All Cap Omni FOF Direct GrowthHybrid Fund of Funds₹32.61
0.25%1.68%
14.32%
15%
Motilal Oswal Multi Asset Passive Fund of Fund Direct GrowthHybrid Fund of Funds₹19.74
0.63%6.36%
14.04%
11.76%
HDFC Multi-Asset Active FoF Direct GrowthHybrid Fund of Funds₹20.48
1%6.31%
13.07%
13.16%
Franklin India Income Plus Arbitrage Active Fund of Funds Growth Plan DirectHybrid Fund of Funds₹25.4
0.13%6.36%
12.52%
11.05%
Aditya Birla Sun Life Dynamic Asset Allocation Omni FOF Direct Plan Growth OptionHybrid Fund of Funds₹62.22
0.22%5.37%
12.33%
11.74%
Bandhan Aggressive Hybrid Passive FOF - Direct Plan - GrowthHybrid Fund of Funds₹52.87
1.74%6.65%
11.83%
9.84%
Quantum Multi Asset Active FOF - Direct GrowthHybrid Fund of Funds₹37.15
0.25%4.9%
10.94%
9.68%
Nippon India Nifty Next 50 Junior BeES FoF Direct Reinvestment Inc Dist cum Cap WdrlHybrid Fund of Funds₹26.63
2.46%3.45%
15.81%
10.92%
HSBC Multi Asset Active FOF Reinvestment of Income Distribution cum Cptl Wdrl Opt DirectHybrid Fund of Funds₹21.49
0.31%13.99%
14.7%
11.92%
Kotak Multi Asset Omni FOF Direct Reinvestment of Income Dist cumCapWdrlHybrid Fund of Funds₹274.35
0.74%8.48%
15.05%
14.97%
I
ICICI Prudential Aggressive Hybrid Active FOF Direct Plan GrowthHybrid Fund of Funds₹242.17
0.02%
-0.3%
13.35%
13.57%
Motilal Oswal Asset Allocation Passive Fund of Fund - Conservative Direct GrowthHybrid Fund of Funds₹18.01
0.42%8.87%
12.97%
10.46%
HDFC Multi-Asset Active FoF Direct Payout Income Dist cum Cap WdrlHybrid Fund of Funds₹20.48
1%6.31%
13.07%
13.16%
Franklin India Income Plus Arbitrage Active Fund of Funds Rnvstmnt of Inc Dist cum CapWdrlPlanDirectHybrid Fund of Funds₹23.28
0.13%5.63%
12.26%
10.89%
Aditya Birla Sun Life Aggressive Hybrid Omni FOF Direct Plan Growth OptionHybrid Fund of Funds₹46.97
0.23%3.61%
10.43%
10.03%
Bandhan Aggressive Hybrid Passive FOF - Direct Plan Inc Dis cum Cptl Wdrl Opt - PHybrid Fund of Funds₹36.4
1.74%6.56%
11.62%
9.61%
Quantum Diversified Equity All Cap Active FOF Direct GrowthHybrid Fund of Funds₹85.75
0.28%0.67%
10.61%
9.68%
Showing 1–20 of 159
