Investing globally sounds exciting, but it can be overwhelming. Which countries should you invest in? Which sectors? How do you manage currency risk? This is where Fund of Funds (FOF) come to the rescue.
A Fund of Funds is essentially a mutual fund that invests in other mutual funds rather than directly in stocks or bonds. Think of it as a curated basket of the best funds across different regions, asset classes, and strategies.
Instead of researching and investing in multiple international funds yourself, a single FOF gives you exposure to various global markets. You might get exposure to US tech stocks, European equities, Asian markets, and emerging economies all in one investment. Some international funds have high minimum investments or are restricted to certain investors. FOFs can give you indirect access to these premium funds at a lower entry point.
Market-Specific FOF Examples for Balanced Global Exposure
Here are some actual FOF options that give you targeted exposure to different global markets (These are just some examples and not fund recommendations):
For US Market Exposure
1. Kotak US Equity Fund of Funds Provides exposure to the world’s largest economy and home to tech giants like Apple, Microsoft, Amazon, and Google. The US market offers stability and access to innovation-driven sectors.
2. Motilal Oswal S&P 500 Index FOF Tracks the S&P 500 index, giving you exposure to 500 of America’s largest companies across diverse sectors. This is a passive strategy with low expense ratios.
3. Edelweiss US Technology FOF Focuses specifically on the US technology sector, investing in companies driving innovation in AI, cloud computing, and digital transformation.
For China Market Exposure
4. Mirae Asset China Advantage Fund Invests in companies domiciled in or having their primary activity in China and Hong Kong. China represents the world’s second-largest economy with massive consumer markets and manufacturing prowess.
5. HSBC China Opportunities Fund Provides access to Chinese equities across sectors like consumer goods, healthcare, and e-commerce, tapping into the growth potential of China’s expanding middle class.
For Japan Market Exposure
6. Nippon India Japan Equity Fund Offers exposure to one of the world’s most technologically advanced economies. Japanese companies are leaders in automotive, robotics, and electronics, and the market often has low correlation with Indian equities.
For Emerging Markets Exposure
7. HSBC Global Emerging Markets Fund Spreads investments across multiple emerging markets including China, Taiwan, India, Korea, South Africa, and Brazil. This fund has delivered strong returns by capturing growth from fast-developing economies.
8. Kotak Global Emerging Market FOF Provides diversified exposure to emerging market companies that benefit from favorable demographic trends and economic development.
While FOFs offer convenience, keep these points in mind:
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Double layer of fees: You pay fees to both the FOF and the underlying funds
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Currency risk: Your returns are affected by INR movement against foreign currencies
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Tax implications: International FOFs are now taxed as debt funds (12.5% LTCG after 2 years)
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Investment horizon: Global FOFs work best with a 5+ year investment horizon
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Less control: You can’t directly choose which underlying funds to invest in
Fund of Funds are an excellent starting point for investors who want global exposure without the complexity of managing multiple international investments. By selecting market-specific FOFs, you can build a truly diversified global portfolio that balances growth potential with risk management.
For someone looking to go beyond Indian equities while maintaining a balanced portfolio, FOFs provide a simple yet effective solution. Just make sure to evaluate the fund’s performance history, expense ratio, underlying fund quality, and investment philosophy before investing.
Remember: Past performance doesn’t guarantee future returns. Funds mentioned here are mere examples and are not fund recommendations