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Business News/ Money / Personal Finance/  Want an exposure to global stocks? You can explore fund of funds. Details here
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Want an exposure to global stocks? You can explore fund of funds. Details here

A number of fund of funds that invest in overseas stocks enable investors to get exposure to US and UK equities without having to open an account in overseas stock markets.

There are 50 mutual fund schemes in the category of fund of funds investing overseasPremium
There are 50 mutual fund schemes in the category of fund of funds investing overseas

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 Rs 23,548 crore. Some of the popular schemes include as follows:

Fund of funds investing overseas                                                                 1-year return (%)AUM (Rs crore)
Mirae Asset NYSE FANG+ ETF FoF                                                      52.441,007.01
Kotak Nasdaq 100 FOF                                                                         29.272,431.83
Motilal Oswal Nasdaq 100 FOF                                                                  27.313,896.66
PGIM India Global Equity Opportunities Fund                                         19.871,322.52
Tata Nifty India Digital ETF FoF                                                             20.2139.52

(Source: AMFI)

As we can see in the table above, the popular schemes include Motilal Oswal Nasdaq 100 FOF (with AUMs of Rs 3,896 crore) and Kotak Nasdaq 100 FOF (Rs 2,431 crore) whereas the less popular ones include Tata Nifty India Digital ETF FoF with a paltry AUMs of Rs 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.

 

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What is a fund of funds
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What is a fund of funds

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Published: 10 Oct 2023, 10:20 AM IST
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