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As Indians, we always get awed by imported materials be it chocolates, watches, mobile phones, clothing, and others. If given a choice, we would always opt for imported goods. A similar trend is visible even in investing. Thanks to mutual funds, more and more Indians are investing abroad through Fund of Funds, and this is visible from the fact that despite the pandemic investors have pumped in over Rs 12,000 crore in the fund of funds investing overseas since March 2020. Let’s first understand what Fund of Funds is.
Fund of Funds
A Fund of Fund (FoF) is a mutual fund scheme that invests in other mutual fund schemes. In this, the fund manager holds a portfolio of other mutual funds instead of directly investing in equities or bonds. A given FoF may invest in a scheme of the same fund house or another fund house. The portfolio is designed to suit investors across risk profiles and financial goals.
The FoF can be domestic as well as overseas. In the case of foreign FoF, the fund manager invests in units of offshore mutual fund schemes. He/she ensures that the target fund’s investment philosophy and risk profile matches that of the fund’s mandate. The main objective is to create wealth over the long run.
Should you invest?
The Fund of Funds is a good bet for small investors who do not wish to take higher risk. The diversification of funds helps to reduce the risk. This is also a great medium of investment for an investor with small amounts of funds available for investment each month. In addition to this, investors who have an investment horizon of five years or more may think of investing in this fund.
That apart these funds allows investor get exposure to global leaders like Apple, Facebook, Netflix, Google (Alphabet) and others. It also reduces portfolio risk as markets around the world rarely go down together.
Top three Funds of Fund
Now that you have understood what exactly Fund of Funds is and is suitable for you. We shortlisted top three performing funds of fund based on their 5-years return having an asset under management of over Rs 1,000 crore.
Edelweiss Greater China Equity Off-shore Fund
Edelweiss Greater China Equity Off-shore Fund allows you to benefit from the growth of the Chinese market for long term wealth creation goals. It is a fund of fund scheme that means it invests in another mutual fund, JPMorgan Funds – JF Greater China Equity Fund, and not shares like other equity funds.
These funds in turn invest in companies Tencent Holdings, Taiwan Semiconductor Manufacturing, Alibaba Group, Meituan Class B, Ping An Insurance (Group) and others.
AUM: Rs 1,630 crore
1-Year CAGR Returns: 29.26%
3-Year CAGR Returns: 25.07%
5-Year CAGR Returns: 24.20%
Since inception: 15.28%
Type: Open-ended equity scheme
Expense Ratio: 2.42%
Minimum Investment: Rs 5,000 in multiples of Re 1 thereafter
Benchmark: MSCI Golden Dragon
Fund manager: Bhavesh Jain
Franklin India Feeder – Franklin US Opportunities Fund
Franklin India Feeder – Franklin U.S. Opportunities Fund saves you the time of picking individual US stocks on your own.
It’s an open-ended equity fund that invests in the Franklin U.S. Opportunities Fund, which taps into the growth of the US stock market by investing in solid companies like Amazon, Mastercard, Microsoft, Apple, Visa and others.
AUM: Rs 3,163 crore
1-Year CAGR Returns: 32.95%
3-Year CAGR Returns: 25.20%
5-Year CAGR Returns: 23.81%
Since inception: 18.98%
Type: Open-ended equity scheme
Expense Ratio: 1.55%
Minimum Investment: Rs 5,000 in multiples of Re 1 thereafter
Benchmark: Russell 3000 Growth
Fund manager: Grant Bowers & Sara Araghi
PGIM India Global Equity Opportunities Fund
PGIM India Global Equity Opportunities Fund generates long-term capital growth from a diversified portfolio of units of overseas mutual funds. The scheme will predominantly invest in the units of PGIM Jennison Global Equity Opportunities Fund (the Underlying Fund), and or similar mutual funds, having an investment objective, strategy & risk profile similar to the stated underlying fund.
AUM: Rs 1,239 crore
1-Year CAGR Returns: 33.55%
3-Year CAGR Returns: 30.87%
5-Year CAGR Returns: 22.29%
Since inception: 11.46%
Type: Open-ended equity scheme
Expense Ratio: 1.33%
Minimum Investment: Rs 5,000 in multiples of Re 1 thereafter
Benchmark: MSCI All Country World
Fund manager: Ravi Adukia
(Disclaimer: The above list is for informational purpose only. Before investing, please consult your financial adviser.)