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Fund of Funds

Small info about Fund of Fund

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aniruddha.gaikwad10
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43 views2 pages

Fund of Funds

Small info about Fund of Fund

Uploaded by

aniruddha.gaikwad10
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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FUND OF FUNDS

• Fund of Funds is an investment strategy of investing funds in other investment funds


like mutual funds or hedge funds.
• FOF don’t directly invest in stocks, bonds or any other securities.
• In this, the fund manager holds a portfolio of other mutual funds instead of directly
investing in equities or bonds.
• Here investors get opportunity to diversify risk by spreading investments across
multiple funds.
• FOFs include additional fees to investors for their role in fund selection and
management.

TYPES OF FUND OF FUNDS

• ETF BASED FOF: These FOFs invest in exchange-traded funds , which further invest in
Indian company shares. This type of FOF provides enhanced accessibility compared
to direct investment in ETFs, but carries higher market volatility due to its trading
nature.
• Gold FOF: These FOFs invest in funds that track the performance of gold or related
assets, offering exposure to gold price movements without physically owning the
metal.
• Multi-manager FOF: These funds consist of different professionally managed mutual
funds in their portfolio, each with distinct holdings. They typically have multiple
portfolio managers, each responsible for a specific asset within the mutual fund.
• International FOF: Mutual Funds operating in foreign countries are targeted by the
international fund of funds. This allows investors to potentially yield higher returns
through the best-performing stocks and bonds of the respective country.

Fund of Funds for Startups (FFS)

• FFS is a government of India initiative set to support startups by investing in


venture capital and other funds tha, in turn invest in startups
• The Government of India has committed Rs. 7,385 crores under Fund of Funds
for Startup India Investment, launched in 2016, for 88 Alternative Investment
Funds (AIFs).
• The amount committed under FFS has grown over the years recording a CAGR
(Compound Annual Growth Rate) of over 21% since the launch of the Scheme.
• FFS has helped anchor 67 AIFs out of 88 AIFs supported.
• 38 of these are first time fund managers which is in line with FFS’s core objective
of anchoring venture capital investments for Indian startups.
• Performing startups supported through FFS are showing valuation increase by
more than 10 times with a number of them even achieving unicorn status.

Role in Economy

• As FOF invest in multiple mutual funds so, this provides capital to companies for
their requirement of funds which support economic growth.
• As FOF has diversed nature which spreads risk across multiple investments, which
can reduce impact of market volatility on investor hence provides stability in the
market.
• FOF can enhance market efficiency by increasing the flow of information and
improving allocation of resources.
• By investing in emerging markets, new technologies, and innovative business models,
FOF can support entrepreneurship and economic development. Which can led to job
creation, technological advancement, and overall economic growth.

Fund of Funds can be valuable investment vehicle, offering diversification, reducing


risks by access of wide range of investment opportunities. While they contribute to
market stability and economic growth, investors get benefited by it.

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