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What are FoFs Domestic Funds?

FoFs are a commonly used term for Funds for Funds. It is a kind of mutual fund that earns its returns from investing in other mutual funds. FoFs have become quite popular recently as you enjoy the benefits of different well-performing mutual funds through a single fund. Different companies manage several FoFs Domestic Funds out there. You can start by investing in one of these funds to get an idea of how it works. View More

Also, FoFs Domestic Funds are used to make investments in hedge funds. Hence, they have gained popularity among seasoned professionals. The risk of a FoFs Domestic Funds depends purely on the fund and the objective with which the fund manager has created the fund. Several portfolios are part of a FoFs Domestic Fund; hence, they come with varying risks.

For instance, if the fund manager wants to maximize the returns from the investment, then they will invest in FoFs and have more mutual funds with high NAV and risk. However, if the fund’s goal is to provide long-term steady returns, low-risk mutual funds will be a part of the FoFs Domestic Fund.

There are several FoFs out there that earn their returns from both international and domestic investments. The choice of the funds that become part of the FoF depends on the fund manager and the asset management company managing the fund.

Who Should Invest in FoFs Domestic Funds?

The primary objective of creating a fund of funds is to reap the benefits of several mutual funds at once and maximize the returns. Also, portfolio diversification ensures that the fund’s risk goes down considerably. If you are someone who has a limited amount for investments and wants to make the most out of the amount available, you must invest in FoFs Domestic Funds. View More

These funds are curated in such a way that you get access to high-value funds along with the low-value funds. Therefore, these funds are an ideal investment option for investors who:

Have limited financial resources but are keen on making an investment
Wants to reap the benefits of different kinds of mutual funds at a nominal amount
They are looking forward to diversifying their portfolio
Likes to experiment with their investments
Have a balanced appetite for risk

Features of FoFs Domestic Funds

Several features of a FoFs Domestic Fund make it different from other mutual funds. Some of these features include:

Unique Investing
Unlike other mutual funds, the FoFs Domestic Funds do not invest in individual instruments. They invest in a range of mutual funds and are called a fund of funds. The fund manager combines different mutual funds with something in common to create a fund of funds. Hence, the fund is unique compared to the other mutual funds.

Diversification
As the fund earns its returns from several other mutual funds, you get a diverse set of assets as a part of your investment. Diversification starts with investments in mutual funds and goes down to the equity and debt component of those mutual funds. You will not find any mutual fund that gives you access to this degree of diversification.

The Risk Exposure
FoFs Domestic Mutual Funds come with a moderate risk as the risk reduces with the diversification of the portfolio. As the investments are made into an array of instruments, the risk gets reduced, and the fund becomes less immune to market fluctuations. Also, FoFs Domestic Funds must have a mix of equity and debt funds. Hence, the risk that comes from the equity funds gets balanced out by the stability of the debt funds.

Taxability of FoFs Domestic Funds

You must comprehend how the returns from a FoFs Domestic Funds will be taxed if you intend to invest in one. FoFs Domestic Funds are taxed as any other mutual fund. Also, a significant portion of these funds has an equity instrument. View More

Hence, the tax treatment of these funds is equivalent to that of equity funds.

The investor is responsible for paying taxes on the returns from a FoFs Domestic Fund. The investor’s income bracket will therefore determine the tax rate. However, you will be required to pay a 20% long-term capital returns tax if you elect to liquidate and sell your fund after 36 months of investing. If you sell off the fund before 36 months, a short-term capital gain tax will be levied on the returns. The tax will depend on the income slab of the investor. FoFs Domestic Funds are typically kept for more than a year.

Risk Involved with FoFs Domestic Funds

While the FoFs Domestic Funds come with a moderate risk, they can sometimes turn out to be risky investments. Some of the risks involved include: View More

If you invest in multiple FoFs Domestic Funds, there are chances that the same equity or debt instrument will be part of different mutual funds that come under the FoF. Hence, overlapping assets might lead to an exponential increase in risk.
If the market is not moving in favor of a particular class of mutual funds and your FoF contains most of the mutual funds from that class, there are chances that you might incur heavy losses.

Advantages of FoFs Domestic Funds

FoFs Domestic Funds are an ideal investment for those who have a moderate risk-taking ability. Also, it is a preferred investment for investors with a limited investment budget. There are several advantages of investing in a FoFs Domestic Mutual Fund. Some of these advantages include: View More

Tax friendliness: You can quickly transfer your investments from other funds to FoFs Domestic Funds without any taxes on capital gains. You will not have to pay any taxes on capital gains whenever you rebalance your fund according to a designated allocation pattern.

Easy handling: While the FoFs Domestic Funds might be made of different mutual funds, it has a single net asset value and is also considered a single investment. Therefore, instead of investing in multiple mutual funds, you can pick a singular FoFs Domestic Fund that invests in all your desired mutual funds. Managing the fund would be easier if you invested in a single fund.

Credible fund managers: As FoFs Domestic Funds involve understanding the financial markets and the performance of different kinds of mutual funds, the asset management company onboards a fund manager after thorough screening. Hence, the fund manager handling your investment will have the required credibility.

Option for early investors: At the initial stage of the investment journey, the investors do not have access to massive money for investments. Hence, a FoFs Domestic Fund allows you to get an overview of the market and make the most out of different mutual funds by just investing in a single mutual fund. If the investor plans on investing the money individually in all the mutual funds, they will fall short of funds.

Who are These Funds Suited For?

FoFs Domestic Funds require a good understanding of the financial markets as one fund contains a set of mutual funds. Hence, an investor must understand the working of a mutual fund to understand how a FoFs Domestic Fund works. These investments are only suitable for investors who are looking for a diversification of their portfolio. Hence, it might not be ideal for traditional investors who are used to investing in specific securities. Also, these funds are suited for people who have: View More

Limited Financial resources: These funds are suitable for investors with a limited money pool but are keen on understanding the market and earning returns from different instruments. FoFs Domestic Funds ensure diversification, and you will experience the movement of different mutual funds at a limited amount of investment.
Moderate risk-taking ability: These investments are for those investors who can take moderate risks. The moderate risk comes from the limited number of equity and equity-linked assets. Hence, these funds are not ideal for aggressive investors looking forward to high returns at significant risk.
Apart from all the factors stated above, you must also consider the following aspects before choosing a FoFs Domestic Fund:

Expense ratio: Almost all the FoFs Domestic Funds have an expense ratio. The expense ratio shows the proportion of investment an investor needs to pay additionally to the asset management company for managing the fund. While most mutual funds come with an expense ratio, the expense ratio in FoFs Domestic Funds is relatively higher.
The fund manager: The working of the FoFs Domestic Mutual Funds is complicated as one fund comprises a set of funds. Choosing these funds can be a difficult task. Hence, the fund manager should have some experience managing these funds. Also, the fund manager must understand the mutual funds’ working to manage an FoF effectively.
Excessive diversification: An FoFs Domestic Fund earns its returns from investing in several securities. Hence, the fund might own the same assets via different mutual funds. Hence, you believe that the portfolio is diversified, but there is a hindrance to the diversification.

Popular FoFs Domestic

  • Fund Name
  • Min SIP Investment Amt
  • AUM (Cr.)
  • 3Y Return

ICICI Pru Thematic Advantage Fund (FOF)-Dir Growth is an FoFs Domestic scheme that was launched on 04-04-13 and is currently under the management of our experienced fund manager Dharmesh Kakkad. With an impressive AUM of ₹1,235 Crores, this scheme's latest NAV is ₹160.7615 as of 17-08-23.

ICICI Pru Thematic Advantage Fund (FOF)-Dir Growth scheme has delivered a return performance of 17.7% in the last 1 year, 28.3% in the last 3 years, and an 15.4% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in FoFs Domestic funds.

  • Min SIP Investment Amt
  • ₹5,000
  • AUM (Cr.)
  • ₹1,235
  • 3Y Return
  • 17.7%

ICICI Pru Passive Strategy Fund (FOF) – Dir Growth is an FoFs Domestic scheme that was launched on 02-01-13 and is currently under the management of our experienced fund manager Dharmesh Kakkad. With an impressive AUM of ₹119 Crores, this scheme's latest NAV is ₹119.792 as of 18-08-23.

ICICI Pru Passive Strategy Fund (FOF) – Dir Growth scheme has delivered a return performance of 14.7% in the last 1 year, 22.9% in the last 3 years, and an 12% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in FoFs Domestic funds.

  • Min SIP Investment Amt
  • ₹5,000
  • AUM (Cr.)
  • ₹119
  • 3Y Return
  • 14.7%

Aditya Birla SL FP FoF – Aggressive – Direct Growth is an FoFs Domestic scheme that was launched on 01-01-13 and is currently under the management of our experienced fund manager Vinod Narayan Bhat. With an impressive AUM of ₹174 Crores, this scheme's latest NAV is ₹41.7781 as of 17-08-23.

Aditya Birla SL FP FoF – Aggressive – Direct Growth scheme has delivered a return performance of 13% in the last 1 year, 18.3% in the last 3 years, and an 12.9% since its launch. With a minimum SIP investment of just ₹100, this scheme offers a great investment opportunity for those looking to invest in FoFs Domestic funds.

  • Min SIP Investment Amt
  • ₹100
  • AUM (Cr.)
  • ₹174
  • 3Y Return
  • 13%

Quantum Multi Asset Fund of Funds – Direct Growth is an FoFs Domestic scheme that was launched on 11-07-12 and is currently under the management of our experienced fund manager Chirag Mehta. With an impressive AUM of ₹53 Crores, this scheme's latest NAV is ₹26.7345 as of 18-08-23.

Quantum Multi Asset Fund of Funds – Direct Growth scheme has delivered a return performance of 8.4% in the last 1 year, 8.9% in the last 3 years, and an 9.3% since its launch. With a minimum SIP investment of just ₹500, this scheme offers a great investment opportunity for those looking to invest in FoFs Domestic funds.

  • Min SIP Investment Amt
  • ₹500
  • AUM (Cr.)
  • ₹53
  • 3Y Return
  • 8.4%

Aditya Birla SL Asset Allocator FoF-Dir Growth is an FoFs Domestic scheme that was launched on 01-01-13 and is currently under the management of our experienced fund manager Vinod Narayan Bhat. With an impressive AUM of ₹167 Crores, this scheme's latest NAV is ₹24.7881 as of 17-08-23.

Aditya Birla SL Asset Allocator FoF-Dir Growth scheme has delivered a return performance of 11% in the last 1 year, 15.7% in the last 3 years, and an 4.9% since its launch. With a minimum SIP investment of just ₹1,000, this scheme offers a great investment opportunity for those looking to invest in FoFs Domestic funds.

  • Min SIP Investment Amt
  • ₹1,000
  • AUM (Cr.)
  • ₹167
  • 3Y Return
  • 11%

ICICI Pru India Equity FOF – Direct Growth is an FoFs Domestic scheme that was launched on 25-02-20 and is currently under the management of our experienced fund manager Dharmesh Kakkad. With an impressive AUM of ₹76 Crores, this scheme's latest NAV is ₹20.7992 as of 17-08-23.

ICICI Pru India Equity FOF – Direct Growth scheme has delivered a return performance of 15.4% in the last 1 year, 28.8% in the last 3 years, and an 23.4% since its launch. With a minimum SIP investment of just ₹500, this scheme offers a great investment opportunity for those looking to invest in FoFs Domestic funds.

  • Min SIP Investment Amt
  • ₹500
  • AUM (Cr.)
  • ₹76
  • 3Y Return
  • 15.4%

Aditya Birla SL FP FoF – Moderate – Direct Growth is an FoFs Domestic scheme that was launched on 01-01-13 and is currently under the management of our experienced fund manager Vinod Narayan Bhat. With an impressive AUM of ₹30 Crores, this scheme's latest NAV is ₹33.5649 as of 17-08-23.

Aditya Birla SL FP FoF – Moderate – Direct Growth scheme has delivered a return performance of 11.4% in the last 1 year, 14.3% in the last 3 years, and an 10.5% since its launch. With a minimum SIP investment of just ₹100, this scheme offers a great investment opportunity for those looking to invest in FoFs Domestic funds.

  • Min SIP Investment Amt
  • ₹100
  • AUM (Cr.)
  • ₹30
  • 3Y Return
  • 11.4%

Motilal Oswal Multi Asset Fund – Direct Growth is an Multi Asset Allocation scheme that was launched on 04-08-20 and is currently under the management of our experienced fund manager Santosh Singh. With an impressive AUM of ₹113 Crores, this scheme's latest NAV is ₹12.6215 as of 18-08-23.

Motilal Oswal Multi Asset Fund – Direct Growth scheme has delivered a return performance of 13% in the last 1 year, 7.8% in the last 3 years, and an 8% since its launch. With a minimum SIP investment of just ₹500, this scheme offers a great investment opportunity for those looking to invest in Multi Asset Allocation funds.

  • Min SIP Investment Amt
  • ₹500
  • AUM (Cr.)
  • ₹113
  • 3Y Return
  • 13%

Aditya Birla SL FP FoF – Conservative – Direct Growth is an FoFs Domestic scheme that was launched on 01-01-13 and is currently under the management of our experienced fund manager Vinod Narayan Bhat. With an impressive AUM of ₹16 Crores, this scheme's latest NAV is ₹28.4309 as of 17-08-23.

Aditya Birla SL FP FoF – Conservative – Direct Growth scheme has delivered a return performance of 10.2% in the last 1 year, 10.9% in the last 3 years, and an 8.7% since its launch. With a minimum SIP investment of just ₹100, this scheme offers a great investment opportunity for those looking to invest in FoFs Domestic funds.

  • Min SIP Investment Amt
  • ₹100
  • AUM (Cr.)
  • ₹16
  • 3Y Return
  • 10.2%

Frequently Asked Questions

Are there any disadvantages of investing in FoFs Domestic Funds? 

There are a few disadvantages of investing in a FoFs Domestic Fund. Unlike other mutual funds, the expense ratio on FoFs Domestic Funds is quite high. Hence, the cost of investments increases considerably.

Also, you need to pay a 1% expense ratio for all the funds that are a part of a particular FoFs Domestic Fund. Additionally, the returns from the investments in FoFs Domestic Funds are taxable in the hands of the investors. Even the long-term capital gain tax can go up to 20%.

How can investors rebalance their investments using FoFs Domestic Funds?

 Investors should rebalance their portfolio now and then to ensure they have the right set of investments. Investors can use FoFs Domestic Funds to rebalance their portfolios. When you get into a portfolio rebalancing transaction that involves FoFs, you will not have to pay any taxes on the capital gains.

However, if you sell your investments to buy any different kind of securities, you will have to pay a capital gain tax. Hence, FoFs Domestic Funds allows you to change your portfolio without incurring an additional cost.

What are International FoF funds?

International FoF funds are another set of FoFs through which you can invest in securities of several global companies. Hence, you get exposure to several international companies by investing in a singular fund.

Also, the best part about International FoF funds is that you do not have to set up multiple trading accounts for investing in these securities. These investment instruments are ideal for investors looking to diversify portfolios from a global level.

What is a Gold Fund of Funds?

A gold fund is a popular FoFs Mutual Fund where the investors invest in gold via ETFs. 99.5% of the entire amount is invested in pure gold. However, an investor needs to have a Demat account if they are interested in investing in a gold fund of funds. All golf FoFs make investments in gold via the gold ETFs. 

Should an investor invest in FoFs Domestic Funds? 

If you are a new investor and are unsure which mutual fund to choose, you can go with a fund that provides you exposure to a set of mutual funds. FoFs Domestic Funds can be a good investment point for new investors.

Also, FoFs are great investment tools if you want to invest in any foreign securities. Most funds are created by grouping several funds from the same asset class. Hence, if an investor wants to invest in mutual funds from different asset classes, a FoFs Domestic Fund might not be the best choice.

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