Post the new tax rules in budget 2024, investors get the benefit of on FoFs if held for more than 24 months. There is renewed interest among investors in such schemes, with a number of new launches from fund houses.
WHAT IS A FUND OF FUND (FoF)?
A fund of fund (FoF) is a mutual fund that invests in other mutual funds or exchange-traded funds (ETFs) rather than directly in individual stocks or bonds. Essentially, it’s a fund that invests in other funds, providing investors with a diversified portfolio through a single investment
WHICH FoF CATEGORIES ARE POPULAR IN INDIA?
The most popular categories of FoFs are the precious metals category and the category. In the gold or silver FoFs, the scheme invests in the gold or silver ETFs of the same fund house. International FoFs invest in funds domiciled outside India, which gives investors exposure to companies listed in other geographies. Recently, the income-plus-arbitrage FoF is also attracting interest, where the scheme invests in a mix of fixed income and arbitrage strategy schemes. In addition, there are equity FoF schemes or thematic FoFs that invest in the best schemes across fund houses or themes chosen from the same fund house. FoFs are now used as a useful tool for diversifying investments across different asset classes