A mutual fund that invests in a variety of different mutual funds accessible in the market using its available set of resources is known as fund of funds. In simpler terms, FOF is a mutual fund scheme that invests in other mutual funds.
These funds offer a great opportunity to diversify risk by spreading investments across multiple funds to the investors.
A Fund of Funds (FoF) is a pool of funds brought together to invest in other funds, generally mutual and hedge funds, rather than directly investing in securities. Here we share the returns posted by fund of funds in past one year.
| Fund of funds | 1-year-return (%) |
| ICICI Prudential Bharat 22 FOF | 22.92 |
| Franklin India Dynamic Asset Allocation Fund Of Funds | 17.26 |
| ICICI Prudential India Equity FOF | 13.47 |
| Franklin India Multi-Asset Solution Fund | 12.53 |
| ICICI Prudential Thematic Advantage Fund (FOF) | 11.67 |
| Kotak Multi Asset Allocator Fund of Fund - Dynamic | 11.10 |
| Nippon India Asset Allocator FoF | 10.03 |
| Franklin India Life Stage Fund of Funds - 40s Plan | 8.86 |
| Nippon India Passive Flexicap FoF | 8.72 |
(Source: ICRA Analytics)
As we can see the maximum return was posted by ICICI Prudential Bharat 22 FOF that gave a return of 22.92 percent. It was followed by Franklin India Dynamic Asset Allocation Fund of Fund with a return of 17.26 percent.
ICICI Prudential India Equity FOF and Franklin India Multi-Asset Solution Fund gave a considerable return of 13.47 and 12.53 percent, respectively. At the same time, ICICI Prudential Thematic Advantage Fund and Kotak Multi Asset Allocator FOF gave a return of 11.67 and 11.10, respectively.
Nippon India Asset Allocator FoF gave a return of 10 percent and Franklin India Life Stage Fund of Funds - 40s Plan gave a single digit return of 8.86.
Although one might wonder as to why should one invest in a fund of funds when one can straight away invest in the target fund. To this, financial advisors say that FOFs are good investment instruments to allocate a part of portfolio to commodities and overseas investments.
“Fund of funds are good for investing in commodities such as silver and gold ETFs. Generally, one would require a demat account to be able to invest directly but as we know, one doesn’t need for investing in a mutual fund. Then there are Fund of funds which invest in global stocks, and the process is too complicated for retail investor. As far as equity FOFs are concerned, fund houses usually invest in their own funds which we don't recommend. There could be overlapping of more than 50 percent of funds, and it lacks diversification,” said S Sridharan, founder and principal officer, Wealth Ladder Direct.
| Global FoFs | 1-year return (%) |
| DSP World Mining Fund | 36.28 |
| ICICI Prudential BHARAT 22 FOF | 33.58 |
| Franklin India Dynamic Asset Allocation FoF | 28.57 |
| Franklin India Multi Asset Solution Fund | 24.34 |
| Aditya Birla Sun Life Global Emerging Opportunities Fund | 16.79 |
| DSP World Gold Fund | 12.14 |
| Edelweiss ASEAN Equity Off Shore | 8.50 |
| Edelweiss US Technology Equity FoF | -1.12 |
(Source: AMFI data as on March 31, 2022)
Among global funds, the top performer was DSP World Mining Fund that gave a return of 36.28 percent and ICICI Prudential BHARAT 22 FOF that delivered an exceptionally high return of 33.58 percent.
Note: This story is for educational purposes only. Please speak to your SEBI-registered investment advisor before investing.