Top 5 fund of funds (FoF) that can maximise your investment returns
Here are five leading Fund of Funds (FoFs) with their historical performance, costs and investment strategies to find the perfect fit for your financial aspirations.
What is Fund of Funds?
A Fund of Funds (FOF) is essentially a mutual fund that pools money into other mutual funds. This approach allows you to bypass the legwork of selecting stocks or bonds individually, as a fund manager curates a portfolio of funds that aligns with your investment objectives and risk comfort, offering you both time savings and immediate diversification across various asset types and strategies.
Benefits of Investing in FOFs
- Diversification: FOFs inherently provide broad diversification across several asset classes and strategies, mitigating risk and smoothing out portfolio volatility.
- Expert Management: Managed by seasoned fund managers, FOFs give you the advantage of expert fund selection and ongoing supervision, sparing you the deep-dive research.
- Simplicity: Investing in FOFs simplifies gaining exposure to a spectrum of funds through a single transaction, streamlining portfolio management and saving you the administrative hassle.
Challenges with FOFs
- Costs: FOFs typically incur double-layered fees: the FOF's own management fee plus the fees of the funds within its portfolio, potentially diluting your investment returns.
- Limited Direct Influence: Investing in FOFs means entrusting fund selection to the managers, reducing your direct influence over specific investment choices.
- Constrained Selection: FOFs may offer fewer investment options within their portfolios compared to the broader universe of individual funds.
Top Performing Fund of Funds as of February 27, 2024:
The below table showcases the performance of a Rs 10,000 monthly SIP over five years in five distinguished FOFs.
|
Fund Name
|
AUM (Rs crore)
|
Expense Ratio %
|
Return (% p.a)
|
Current Value (Rs lakh)
|
|
ICICI Prudential Thematic Advantage Fund
|
1,479.00
|
0.48
|
26.27
|
11.47
|
|
ICICI Prudential Passive Strategy Fund
|
145.00
|
0.13
|
22.06
|
10.37
|
|
Aditya Birla Sun Life Financial Planning Aggressive Plan
|
195.00
|
0.35
|
19.36
|
9.71
|
|
Aditya Birla Sun Life Asset Allocator
|
195.00
|
0.31
|
18.09
|
9.41
|
|
ICICI Prudential Asset Allocator Fund
|
21,399.00
|
0.23
|
16.70
|
9.10
|
- ICICI Prudential Thematic Advantage Fund: Stands out for its superior five-year returns (26.27 per cent p.a.) albeit with the highest fee ratio (0.48 per cent). Best suited for those with a high-risk tolerance interested in thematic investments.
- ICICI Prudential Passive Strategy Fund: Strikes a balance between returns (22.06 per cent p.a.) and costs (0.13 per cent), ideal for investors seeking exposure to India's Large-Cap sector with minimal active risk management.
- Aditya Birla Sun Life Financial Planning Aggressive Plan: Offers slightly lower fees (0.35 per cent) with commendable returns (19.36 per cent p.a.), fitting for moderately aggressive investors.
- Aditya Birla Sun Life Asset Allocator: A balanced mix of equity and debt, providing moderate returns (18.09 per cent p.a.) at a lower cost (0.31 per cent), suitable for those with a balanced risk appetite.
- ICICI Prudential Asset Allocator Fund: Features the lowest fees (0.23 per cent) and returns (16.70 per cent p.a.), catering to conservative investors focusing on capital preservation.
Selecting an FOF should be based on your personal investment goals, risk tolerance, and investment horizon. Thorough research and comparison of different FOFs, considering their objectives, historical performance, fees, and portfolio holdings, are crucial steps before making an investment decision.
Disclaimer: The article is for informational purposes only and not investment advice.