Best FoFs Domestic Funds
About FoF Domestic Mutual Funds
A Fund of Fund (FoF) is an investment strategy of holding a portfolio of other investment funds instead of investing directly in stocks, bonds or other securities. This kind of scheme mainly invests in the units of another mutual fund scheme.
In the case of FoF Domestic Funds, FoF mainly makes investments in other funds that focus on domestic markets, which in this context would typically refer to a specific country’s stock and bond markets. These funds allow investors to invest in domestic markets.
Domestic FoFs have various investment objectives, such as capital appreciation, income generation, or a combination of both, depending on the specific fund’s goals.
How FoF Domestic Fund Works?
FOF domestic funds come in many configurations as they primarily invest in line with their investment objective, which varies across schemes. Depending on the objective, the scheme may invest in equity funds, debt funds, hybrid funds or a combination of these.
Features of FoF Domestic Mutual Funds
- Diversification: Domestic FOFs primarily make investments in various domestic mutual funds, which can help reduce risk.
- Convenience: These funds are a one-stop shop for investors who want to invest in a variety of mutual funds.
- Professional management: Domestic Fund of Funds are managed by experienced fund managers who have the expertise to select and manage a portfolio of mutual funds.
Advantages of Investing in FoF Domestic Funds
- Easy Rebalancing: Rebalancing is essential when it comes to managing your investment portfolio. It could be necessary for you to sell some investments and buy others in order to rebalance your portfolio based on the performance of the underlying assets. If you sell investments in this situation, you can be obliged to pay capital gains tax.
- Diversification: The main benefit of FoFs is that they allow investors to access a variety of mutual funds with various investment objectives with just one investment.
- Transparency: Domestic FOFs are required to regularly declare their portfolios. Investors can now view the mutual funds in which the FOF has invested as well as the amount invested in each fund. This can assist investors in making knowledgeable choices regarding whether or not to invest in a specific FOF.
Risk Involved in FoF Domestic Funds
- Market risk: These funds mainly invest in the securities of markets. The markets are volatile in nature, which leads the fund to market risk.
- Manager risk: The fund manager’s expertise affects how well a FOF performs. The performance of the FOF may deteriorate if the fund manager’s strategy of investment does not work.
Factors To Consider Before Investing in FoF Domestic Funds
- Investment Objective: You should make sure that your investment objective matches with the scheme’s. For instance, if you are looking to park your funds for emergencies, FoF is not an ideal fund. This is better suited for objectives like long-term wealth creation.
- Risk Tolerance: Before investing in the scheme, always check the level of risk associated with the scheme and your risk tolerance as well. For instance, if you have a low risk tolerance, this may not be an ideal investment for you.
- Investment Horizon: FOFs are best suited for long-term investors. Hence, it is prudent to check your investment horizon.
Who Should Invest in FoF Domestic Mutual Funds?
Domestic FOFs can be a suitable investment option for numerous investors such as:
- New investors: These mutual funds are a good way for new investors to get started with mutual funds. Domestic FoFs help investors easily access a diversified portfolio of mutual funds, which can help reduce risk.
- Investors with limited time: If you are an investor not looking to do independent research and select individual mutual funds, then it is a good option.
- Investors who like diversification: FOFs are allowed to invest in a variety of asset classes, such as equity, debt, and gold. As a result, this can help investors to diversify their portfolios and reduce risk.
Taxability of FoF Domestic Funds
As per the new tax rules that took effect on April 1, 2023, the Fund of Funds are considered non-equity funds, irrespective of the equity holdings in the scheme. Hence, the FoF Domestic Funds gains are added to the investor’s income and taxed as per their income tax slab.
How To Invest in FoF Domestic Funds?
Investing in the FoF Domestic Funds is an easy process when you do it through your Angel One account. Just follow these simple steps:
Step 1: Log in to your account on Angel One.
Note: In case you are yet to open an account with Angel One, open a free demat account with us within a few minutes by submitting the relevant documents.
Step 2: Find a FoF Domestic Fund that suits your needs and risk profile. You can learn more about the Flexi Funds on the Angel One app. Things to do at this stage are:
- Search for the fund you want to invest in based on your preference.
- Analyse the fund’s past performance, tax impact, future potential, etc. You can calculate the potential returns using the mutual fund returns calculator.
- Evaluate the fund’s level of risk, its ratings, lock-in period and expense ratio.
Step 3: Once you decide which FoF Domestic Fund you want to invest in, open your Angel One account, go to the Mutual Funds section, and buy the mutual fund’s units. The steps involved are:
- Decide whether you want to invest via SIP or a lump sum one-time investment.
- Choose a monthly SIP date. Enter the amount you want to invest and choose your preferred payment mode.
- After placing the order, you can create an AutoPay to make hassle-free future instalments in case of SIP investments.
Top 5 FoF Domestic Mutual Funds to Invest in
The following are the top FoFs Domestic Funds in India:
| Name of the Fund | AUM (₹ Cr) | CAGR 5Y | Expense Ratio | Sharpe Ratio | CAGR 3Y |
| ICICI Pru Bharat 22 FOF | 2218.52 | 24.51 | 0.12 | 0.17 | 28.93 |
| ICICI Pru Thematic Advantage Fund | 2198.75 | 23.74 | 0.47 | 1.30 | 18.13 |
| Nippon India Nifty Next 50 Junior BeES FoF | 514.67 | 17.28 | 0.13 | 0.59 | 15.64 |
| ICICI Pru Passive Strategy Fund | 175.22 | 17.12 | 0.18 | 0.67 | 15.78 |
| Aditya Birla SL Financial Planning FOF Aggressive Plan | 214.94 | 16.31 | 0.42 | 0.53 | 14.56 |
The above-mentioned top mid-cap funds are for informational purposes only and are not recommendations. The funds are ranked based on 5-year CAGR as of January 2025.
ICICI Pru Bharat 22 FOF
The ICICI Pru Bharat 22 FOF ranks 1st based on its 5-year CAGR of 24.51%. It has the highest AUM among the 5 funds, at ₹2,218.52 crore, and the lowest expense ratio of 0.12%.
The fund’s alpha is 1.40, ranking 3rd in the list, while its Sharpe ratio of 0.17 is the lowest. Over the past 3 years, it has delivered a CAGR of 28.93%, the highest among the 5 funds.
ICICI Pru Thematic Advantage Fund
The ICICI Pru Thematic Advantage Fund ranks 2nd with a 5-year CAGR of 23.74%. It has an AUM of ₹2,198.75 crore and an expense ratio of 0.47%, which is the highest in the list.
The fund’s alpha of 4.42 is the highest among the 5 funds, while its Sharpe ratio of 1.30 is the 2nd highest. Over the past 3 years, it has delivered a CAGR of 18.13%, ranking 3rd in 3-year performance.
Nippon India Nifty Next 50 Junior BeES FoF
The Nippon India Nifty Next 50 Junior BeES FoF ranks 3rd with a 5-year CAGR of 17.28%. It has an AUM of ₹514.67 crore and an expense ratio of 0.13%, which is the 2nd lowest in the list.
The fund’s alpha of 1.66 is the 2nd highest, while its Sharpe ratio of 0.59 ranks 3rd. Over the past 3 years, it has delivered a CAGR of 15.64%, ranking 4th in 3-year performance.
ICICI Pru Passive Strategy Fund
The ICICI Pru Passive Strategy Fund ranks 4th with a 5-year CAGR of 17.12%. It has the lowest AUM among the 5 funds, at ₹175.22 crore, and an expense ratio of 0.18%.
The fund’s alpha of 1.38 is the lowest among the 5 funds, while its Sharpe ratio of 0.67 ranks 2nd. Over the past 3 years, it has delivered a CAGR of 15.78%, ranking 2nd in 3-year performance.
Aditya Birla SL Financial Planning FOF Aggressive Plan
The Aditya Birla SL Financial Planning FOF Aggressive Plan ranks 5th with a 5-year CAGR of 16.31%. It has an AUM of ₹214.94 crore and an expense ratio of 0.42%.
The fund’s alpha of 0.45 is the 2nd lowest, while its Sharpe ratio of 0.53 is also the 2nd lowest. Over the past 3 years, it has delivered a CAGR of 14.56%, the lowest in the list.
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