If you want to invest in overseas stocks such as Apple, Google, Netflix and Meta to capitalise on exceptional returns given by these US companies and their benchmark indices (such as S&P 500) then you can explore investing via mutual funds.
To make this happen, you have to opt for a category of mutual funds called ‘fund of funds’ (FOFs) that invest in overseas stock markets, enabling domestic investors to get an exposure to American stocks. For instance, ICICI Prudential Nasdaq 100 index FOF has constituent stocks of Apple, Microsoft, Amazon, NVidia and Meta, among others.
Let us first understand what exactly is the fund of funds?
What are fund of funds?
It is a pool of funds brought together to invest in other funds, generally mutual and hedge funds, instead of directly investing in securities.
And FoF investing overseas are the mutual funds that invest in an underlying fund which — in turn — invests in overseas stocks. As per the Sebi’s categorisation, a fund of funds (FoF) is a mutual fund that invests a minimum of 95 percent in the underlying fund.
There are 50 mutual fund schemes that fall under this category (FoF investing overseas) with total assets under management (AUMs) amounting to ₹23,548 crore. Some of the popular schemes include as follows:
|Fund of funds investing overseas||1-year return (%)||AUM ( ₹crore)|
|Mirae Asset NYSE FANG+ ETF FoF||52.44||1,007.01|
|Kotak Nasdaq 100 FOF||29.27||2,431.83|
|Motilal Oswal Nasdaq 100 FOF||27.31||3,896.66|
|PGIM India Global Equity Opportunities Fund||19.87||1,322.52|
|Tata Nifty India Digital ETF FoF||20.21||39.52|
As we can see in the table above, the popular schemes include Motilal Oswal Nasdaq 100 FOF (with AUMs of ₹3,896 crore) and Kotak Nasdaq 100 FOF ( ₹2,431 crore) whereas the less popular ones include Tata Nifty India Digital ETF FoF with a paltry AUMs of ₹39.52 crore.
Experts argue that these schemes have a higher operating cost, so they are ideal for investors who opt for them to be able to invest in the global stocks.
“Investing in global stocks is otherwise a little complicated for a lay investor, so one can get an exposure to them via fund of funds,” says Sridharan S., a Sebi registered investment advisor.