Fund of Funds

A Fund of Funds (FoF) is a mutual fund that invests in other mutual funds. Just as fund invests in stocks or bonds on your behalf, a FoF invests in other mutual fund schemes. So it is a basket of mutual fund schemes that can invest in equity and debt schemes depending on its investment objective. These can belong to the same mutual funds as the FoF or belong to different mutual fund houses. At present, the FoFs offered in India belong to the same fund house. Just like other mutual fund schemes, an FoF will also have its expenses. Regulations permit an FoF to charge 0.85 per cent as expenses. If this is added to the 2.5 per cent, the maximum expense ratio that an equity fund can charge, then the total cost of this offer can be as high as 3.35 per cent. Expenses will, however, be the only area where a Fund of Fun

This article was originally published on January 08, 2004.