Fund of Funds

Fund of Funds (FOF) is a type of mutual fund where a fund invests in other mutual funds rather than directly in individual securities. Essentially, it's a fund that holds a portfolio of other funds rather than investing directly in stocks, bonds, or other assets. The underlying funds can be from the same or different asset managers, and they may include mutual funds, exchange-traded funds (ETFs), or hedge funds.

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ICICI Prudential Asset Management Company LimitedHDFC Asset Management Co LtdSBI Funds Management LtdKotak Mahindra Asset Management Co LtdNippon Life India Asset Management LtdAditya Birla Sun Life AMC LtdAxis Asset Management Company LimitedUTI Asset Management Co LtdMirae Asset Investment Managers (India) Private LimitedTata Asset Management LimitedDSP Asset Managers Private LimitedBandhan Asset Management Company LimitedHSBC Asset Management(India)Private LtdDSP Investment Managers Private LimitedIDFC Asset Management Company LimitedFranklin Templeton Asst Mgmt(IND)Pvt LtdCanara Robeco Asset Management Co. Ltd.Edelweiss Asset Management LimitedQuant Money Managers LimitedInvesco Asset Management (India) Private LtdPPFAS Asset Management Pvt. LtdMirae Asset Mutual FundMotilal Oswal Asset Management Company Limited - Portfolio ManagersSundaram Asset Management Company LtdMirae Asset Global Inv (India) Pvt. LtdBaroda BNP Paribas Asset Management India Pvt. Ltd.JM Financial Asset Management LimitedMahindra Manulife Investment Management Pvt. Ltd.LIC Mutual Fund Asset Management LimitedPGIM India Asset Management Private LimitedDaiwa Asset Mgmt. (India) Pvt. Ltd.Fund PineBridge Mutual FundUnion Asset Management Co. Pvt. Ltd.Baroda Asset Management India LimitedBajaj Finserv Asset Management LimitedPrincipal Asset Management Private LimitedWhiteOak Capital Asset Management Limited360 ONE Asset Management LimitedJPMorgan Asset Management India Pvt. LtdEdelweiss Mutual FundBank of India Investment Managers Private LimitedITI Asset Management LimitedNavi AMC LimitedNJ Asset Management Private LimitedICICI Prudential Asset Mgmt.Company LimitedFranklin Templeton Asset ManagementIDBI Asset Management LimitedQuantum Asset Management Co Pvt. Ltd.Samco Asset Management Pvt LtdHelios Capital Asset Management (India) Private LimitedGroww Asset Management Ltd.Trust Asset Management Private LimitedTaurus Asset Management Company LimitedShriram Asset Management Co LtdOld Bridge Asset Management Private LimitedZerodha Asset Management Private LimitedING Investment Mgnt (India) Private Ltd.Baroda BNP Paribas Mutual Fund
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Advantages of investing in Fund of Funds

Investing in Fund of Funds offers several advantages for investors:

  • Diversification

    FoFs provide instant diversification by investing in a variety of underlying funds across different asset classes, sectors, and geographic regions. This diversification helps spread risk and reduce the impact of poor performance in any single investment.

  • Access to Specialized Strategies

    FoFs can provide access to specialized investment strategies or asset classes that may be challenging for individual investors to access or analyze on their own. Examples include alternative investments like hedge funds or private equity, as well as niche sectors or emerging markets.

  • Convenience and Accessibility

    Investing in a FoF allows investors to access a diversified portfolio through a single investment vehicle. This simplifies the investment process, as investors do not need to select and manage individual securities or funds themselves.

Limitations of Investing in Fund of Funds

While Fund of Funds offer several advantages, they also come with certain limitations and risks that investors should consider:

  • Potential Over-Diversification

    While diversification is a key benefit of FoFs, it's possible to become overly diversified, which can dilute potential returns. Additionally, too much diversification may lead to portfolio holdings that closely mirror the broader market, limiting the potential for outperformance.

  • Limited Control

    Investing in a FoF means relinquishing control over the selection and allocation of underlying funds to the FoF manager. Investors must trust the manager's judgment and may not have the ability to tailor the portfolio to their specific preferences or beliefs.

  • Performance Dependency

    The performance of a Fund of Funds is heavily dependent on the performance of its underlying funds. If one or more underlying funds perform poorly, it can drag down the overall performance of the FoF, regardless of the manager's skill.

Points to consider before investing in Fund of Funds

Before investing in Fund of Funds, it's crucial to consider several key points to make informed investment decisions and manage risks effectively. Here are some points to consider:

  • Investment Objectives

    Determine if the FoF's investment objectives align with your own financial goals, risk tolerance, and time horizon. Understand the fund's target returns, asset allocation strategy, and investment focus.

  • Risk Profile

    Evaluate the risk profile of the FoF, including the types of underlying funds it invests in, the level of diversification, and historical volatility. Consider whether the fund's risk level is suitable for your investment preferences.

  • Performance Track Record

    Review the historical performance of the FoF and its underlying funds. Look for consistent returns over various market cycles and compare performance against relevant benchmarks and peer groups.

  • Fees and Expenses

    Understand the fee structure of the FoF, including management fees, expense ratios, and any other charges. Compare these costs to similar funds and consider their impact on potential returns over time.

How to start investing in Fund of Funds with INDmoney?

Now that you have understood what are Fund of Funds, you need to know how easily you can start your investment with INDmoney. Just follow these simple steps given below, to start your mutual fund investment journey with us.

  • Step 1

    Download the INDmoney app and create your free investment account by completing your KYC ( Know Your Customer).

  • Step 2

    Once your Free investment account is ready, you can either search for a Fund of Funds or go to the mutual fund section and tap on Fund of Funds from Discover All Categories.

  • Step 3

    Choose a Fund of Funds by looking at aspects like past returns, volatility, downside capture ratio, AUM, Expense ratios and underlying stocks and sectors.

  • Step 4

    You can choose to set up SIP in Fund of Funds or even invest as lumpSum. Once you are on the individual Fund of Funds page click from the bottom “One-time” for lump sum investment or “SIP” for systematic investment plan. 

  • Step 5

    Choose the amount that you want to invest as SIP or LumpSum.

  • Step 6

    Set up payments. If you choose to set up SIP in Fund of Funds Funds,  you can do a free automatic pay set up via bank mandate or UPI. If you choose to invest in lumpsum (one-time) then you can pay via UPI, netbanking, NEFT or RTGS.


     

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