Top Fund of Funds in India

Are you looking for passive funds India types on the internet? Skimming through the list of index funds, Exchange Traded Funds (ETFs) and others, you might find a term called “Fund of Funds”. 

 

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So, what could this passive funds India type be? 

As its name suggests, a Fund of Funds or FoF is a mutual fund that invests in other mutual funds. It is a passive funds India investment strategy that involves investing in other investment funds rather than directly in individual securities like stocks or bonds. 

 

Let us learn more about the structure, benefits, limitations and types of FoFs in this blog:

 

Structure of Funds of Funds

 

1. Investment Composition

 

A FoF pools capital from multiple investors and allocates it across various underlying funds. This could include mutual funds, hedge funds, private equity funds or other investment vehicles.

 

2. Management

 

FoFs are typically managed by experienced investment professionals who conduct extensive research and due diligence to select the underlying funds based on factors such as performance history, strategy and risk profile.

 

3. Portfolio Construction

 

The FoF manager decides how much capital to allocate to each underlying fund, balancing the overall portfolio to achieve specific investment objectives. This construction can vary based on market conditions and the manager’s outlook.

 

Benefits of Funds of Funds

 

1. Diversification

 

By investing in multiple funds, FoFs spread risk across various asset classes and strategies. This diversification can reduce the impact of poor performance by any single fund. They can provide broad exposure across different asset classes, sectors, and geographic regions, helping to mitigate risk.

 

2. Expertise Access

 

Investors gain exposure to a range of professional fund managers and their investment strategies, which might be difficult to access directly.

 

3. Simplicity and Convenience

 

For individual investors, managing a diversified portfolio of funds can be complex. FoFs streamline this process, allowing investors to manage their investments through a single vehicle.

 

4. Reduced Volatility

 

The diversification and professional management of FoFs can lead to more stable returns compared to investing in individual funds or securities.

 

5. Variety of Strategies

 

FoFs can include a mix of traditional and alternative strategies, allowing investors to tailor their risk exposure according to their preferences.

 

Limitations of FoFs

 

1. Higher Fees

 

FoFs generally have higher expense ratios due to the dual layer of fees—fees for the FoF itself and additional fees for the underlying funds. 

 

2. Complexity in Fee Structure

 

Understanding the total cost of investing in a FoF can be challenging as it requires evaluating the fees of both the FoF and its underlying funds.

 

3. Performance Variability

 

The performance of a FoF depends not only on the fund’s management but also on the performance of the underlying funds which can vary widely.

 

4. Limited Control

 

The investors in a FoF have to let go of some control over their investment decisions as the FoF manager makes all decisions regarding fund selection and allocation.

 

Types of Funds of Funds

 

1. Equity FoFs

 

These invest primarily in equity mutual funds or equity-focused hedge funds. They may focus on specific sectors, regions, or investment styles.

 

2. Bond FoFs

 

These funds primarily invest in fixed-income mutual funds or bond-focused funds, targeting different maturities and credit qualities.

 

3. Hedge Fund FoFs

 

These invest exclusively in hedge funds, providing access to a variety of hedge fund strategies while mitigating individual hedge fund risks.

 

4. Alternative Investment FoFs

 

These may include a mix of various alternative investments, such as real estate, commodities, and private equity.

 

5. Target Date FoFs

 

These funds adjust their asset allocation based on a specific target date, typically associated with a retirement timeline, becoming more conservative as the target date approaches.

 

Top 10 FoFs in India 

 

Below is the list of top FoFs India based on one-year and three-years returns.

 

Top FoF India Based on 1-year Return

 

Scheme NameBenchmarkReturn 1-Year (%) RegularDaily AUM (₹ in cr)
Nippon India Next 50 Junior BeES FoFNifty Next 50 Total Return Index61.16498.55
Mirae Asset NYSE FANG+ ETF FoFNYSE FANG+ Total Return Index57.881,487.66
ICICI Prudential Bharat 22 FoFBSE Bharat 22 Total Return Index50.782,095.40
Franklin India Feeder Franklin US Opportunities FundRussell 3000 Growth Total Return Index48.973,611.68
Bandhan US Equity FoFRussel 1000 Growth Total Return Index48.53328.24
Mirae Asset Nifty India Manufacturing ETF FoFNifty India Manufacturing Total Return Index48.47112.28
Mirae Asset Global X Artificial Intelligence & Technology ETF FoFIndxx Artificial Intelligence & Big Data Index TRI45.87315.68
DSP World Gold FoFFTSE Gold Mines Index45.351,163.99
ICICI Prudential Nifty Alpha Low- Volatility 30 ETF FoFNifty Alpha Low Volatility 30 Total Return Index45.27776.85
Edelweiss US Technology Equity FoFRussel 1000 Equal Weighted Technology Index43.702,329.48

Source: Accessed through Kuvera| 29/10/2024

 

Top FoF India Based on 3-year Return

 

Scheme NameBenchmarkReturn 3-Year (%)Daily AUM (₹ in cr)
ICICI Prudential BHARAT 22 FoFBSE Bharat 22 Total Return Index32.482,095.40
Mirae Asset NYSE FANG+ ETF FoFNYSE FANG+ Total Return Index19.271,487.66
Nippon India Nifty Next 50 Junior BeES FoFNIFTY Next 50 Total Return Index18.75498.55
ICICI Prudential Nifty Alpha Low - Volatility 30 ETF FoFNifty Alpha Low Volatility 30 Total Return Index18.27776.85
Kotak Multi Asset Allocator FoF - DynamicNIFTY 50 Hybrid Composite debt 50:50 Index - 90%

Domestic Price of Gold - 5%

MSCI World - 5%
17.821,578.92
Nippon India Asset Allocator FoFCRISIL Hybrid 50+50 Moderate Index - 90%

Domestic Price of Gold - 10%
17.29297.98
Invesco India Gold ETF FoFDomestic Price of Gold16.3294.50
Axis Gold FundDomestic Price of Gold16.27671.03
SBI Gold FundDomestic Price of Gold16.262,436.73
Quantum Gold Savings FundDomestic Price of Gold16.17141.48

Source: Accessed through Kuvera| 29/10/2024

 

New FoFs Launched in 2024

 

As of 2024, there have been several new FoFs launched across various sectors, particularly in private equity, venture capital and hedge funds. Some notable ones are listed below:

 

Scheme NameOpen DateClose Date
Zerodha Gold ETF FoF25-10-202408-11-2024
Groww Gold ETF FoF16-10-202430-10-2024
Mirae Asset Gold ETF FoF22-10-202428-10-2024
Groww Nifty India Defence ETF FoF04-10-202418-10-2024
Groww Nifty EV & New Age Automotive ETF FoF07-08-202414-08-2024
Mirae Asset Nifty 200 Alpha 30 ETF FoF22-07-202422-07-2024
SBI Silver ETF FoF05-07-202411-07-2024
Mirae Asset Nifty MidSmallcap400 Momentum Quality 100 ETF FoF24-05-202431-05-2024
DSP US Treasury FoF13-03-202418-03-2024
Mirae Asset Nifty Smallcap 250 Momentum Quality 100 ETF FoF28-02-202401-03-2024

Source: Accessed through Kuvera| 29/10/2024

 

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Wrapping Up

 

FOFs offer a unique passive funds India investment opportunity, providing investors with a convenient way to diversify across multiple asset classes and fund managers. While they offer the advantage of professional management and diversification, it’s crucial for investors to carefully evaluate the underlying funds, fees, and the fund manager’s expertise. Before investing in an FOF, thorough research and understanding of the investment objectives and risks involved are essential. As with any investment, consulting a financial advisor can help make informed decisions that align with individual financial goals and risk tolerance.

 

 

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DISCLAIMER: Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. Registration granted by SEBI, membership of BASL (in case of IAs) and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. Investments in securities market are subject to market risks. Read all the related documents carefully before investing. The securities quoted are for illustration only and are not recommendatory.

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