Best FoFs Overseas Funds
About FoF Overseas Mutual Funds
Fund of Funds (FoF) is a type of mutual fund that invests in other mutual funds. In simple terms, unlike other mutual fund types, which invest directly in stocks or other instruments, FoF invests in a portfolio of several mutual fund schemes.
FoF Overseas Funds are mutual fund schemes that invest at least 95% of the assets in overseas funds. These funds allow investors to invest in overseas markets without an overseas trading account. FoF Overseas Funds are also known as global funds or international funds.
FoF Overseas Mutual Funds can be a good option for investors who want to diversify their portfolios and gain exposure to global markets. However, it is important to note that these funds have a higher expense ratio than regular mutual funds. This is because they have to pay the management fees of the underlying funds and their own management fees.
How FoF Overseas Funds Work?
A fund of funds (FOF) overseas fund invests in a diversified portfolio of overseas mutual funds without having to invest in each fund individually. Since these funds have global exposure, they come with some risks, such as currency, political and economic risks.
Features of FoF Overseas Mutual Funds
- Professional management: FoF Overseas Funds are managed by professional fund managers who deeply understand global markets.
- Higher expense ratios: FoF Overseas Funds typically have higher expense ratios than regular mutual funds.
- Variety of investment objectives: These funds come in various investment objectives, such as global equity, global bond, regional, and sectoral. This means you can choose a fund that aligns with your specific investment goals.
- Liquidity: These are typically open-ended funds, which means that investors can redeem their units at any time.
Advantages of Investing in FoF Overseas Funds
- Diversification: FoF Overseas Funds offer investors the opportunity to diversify their portfolios by investing in various asset classes and geographies. This can help to reduce risk and improve overall returns.
- Convenience: These international funds provide investors with a convenient way to invest in global markets like China, Singapore, USA, etc., without opening an overseas trading account.
- Potential for higher returns: Over the long term, global markets have the potential to offer higher returns than domestic markets. Also, investing in a higher currency market than the domestic market can offer higher returns.
- Access to new markets: FoF Overseas Funds can provide access to new markets that may not be available through domestic mutual funds. This can help you to capitalise on specific trends or opportunities in global markets.
Risks Involved in FoF Overseas Funds
- Currency risk: As FoF Overseas Funds invest in foreign currency, your investment gets exposed to exchange rate fluctuations.
- Market risk: Emerging markets usually exhibit higher levels of investment risk.
- Country risk: FoF Overseas Funds are also exposed to country risk, which is the risk that the value of the underlying investments will decline due to political or economic instability in the countries where they invest.
Factors To Consider Before Investing in FoF Overseas Funds
- Investment objective and risk tolerance: Overseas FOF funds are generally considered to be more risky than domestic FOF funds due to foreign exposure, such as currency risk and political risk.
- Investment horizon: Since overseas markets can be more volatile, these funds are suited for investors with a long-term investment horizon, typically at least 5 years.
- Fund manager: Look for a fund manager with a good track record of investing in overseas markets.
- Currency risk: FoF Overseas funds are exposed to currency risk – that the value of the underlying overseas funds will decline due to changes in currency exchange rates.
- Political and economic risk: FOF Overseas funds are exposed to political and economic risk associated with the countries where the underlying overseas funds invest.
Who Should Invest in FoF Overseas Mutual Funds?
FoF Overseas Mutual Funds can be a good option for:
- Investors with a long-term investment horizon: Investors who are saving for retirement or other long-term goals can choose FoF Overseas Funds. This is because they offer the potential for higher returns over the long term, even though they may be more volatile in the short term.
- Investors who want to diversify their portfolios: If you want to add diversification to a portfolio of domestic mutual funds, you can consider these overseas funds. These funds invest in a variety of different asset classes and geographies. This can help to reduce risk and improve overall returns.
- Investors who want to invest in a specific region or sector: These funds provide an opportunity to invest in specific regions or sectors of the global market. This can be a good option if you want to capitalise on specific trends or opportunities.
- Investors who are open to market risk: These overseas funds come with a market risk. If you are willing to take a chance with the market fluctuations, you can consider FoF Overseas Funds.
Taxability of FoF Overseas Funds
As per the new tax rules that came into effect on April 1, 2023, the Fund of Funds are considered as non-equity funds, irrespective of the equity holdings in the scheme. Hence, the gains on the FoF Overseas Funds are added to the investor’s income and taxed as per their income tax slab.
How To Invest in FoF Overseas Funds?
Investing in Fof Overseas Funds through your Angel One account is a streamlined process that involves a few simple steps:
Step 1: Begin by logging in to your Angel One account using your registered mobile number. After logging in, validate the OTP (One-Time Password) for security purposes, and then enter your MPIN to access your account.
Please note that if you don’t have a Demat account with Angel One, you can open one quickly by completing the KYC (Know Your Customer) procedure and submitting the necessary documents.
Step 2: Once you’ve successfully logged in, it’s time to choose the most suitable mutual fund based on your financial needs and risk profile. You can evaluate various funds by navigating to the mutual fund section on the Angel One app. During this stage, consider the following factors:
- Search for the specific fund you wish to invest in or take recommendations from funds listed by Angel One across different categories.
- Analyse the fund’s historical performance, tax implications, constituent sectors, and the stocks it comprises.
- Utilise the provided calculator to estimate potential returns.
- Assess the level of risk associated with the fund and compare it to your risk tolerance.
- Check the fund’s ratings assigned by reputable rating agencies, typically on a scale from 1 to 5.
- Take note of the fund’s expense ratio, which provides insight into the cost of investing in it.
Step 3: After finalising the fund(s) you want to invest in, navigate to your Angel One account’s Mutual Funds section and search for your chosen fund. Since investing in mutual funds often involves a long-term commitment, exercise caution when selecting the fund(s) you intend to invest in. During this stage, consider the following:
- Decide whether you want to invest a lump sum amount or set up a monthly Systematic Investment Plan (SIP).
- Enter the investment amount you are comfortable with and choose your preferred payment method. UPI is the recommended mode, but you can also opt for net banking.
- After placing your order, you can establish a mandate for hassle-free future instalments if you’ve chosen the SIP investment route.
Top 5 FoF Overseas Mutual Funds to Invest in
The following are the top FoFs Overseas Funds in India:
| Name of the Fund | AUM (₹ Cr) | CAGR 5Y | Expense Ratio | Sharpe Ratio | CAGR 3Y |
| Motilal Oswal Nasdaq 100 FOF | 6586.76 | 26.23 | 0.24 | 1.63 | 24.96 |
| DSP US Flexible Equity FoF | 867.29 | 17.57 | 1.49 | 1.18 | 16.15 |
| PGIM India Global Equity Opp Fund | 1348.95 | 17.20 | 1.42 | 0.95 | 14.11 |
| Franklin India Feeder – Franklin U.S. Opportunities Fund | 3748.66 | 17.11 | 0.62 | 1.34 | 15.54 |
| Invesco India – Invesco Global Equity Income FoF | 25.99 | 15.59 | 0.86 | 1.48 | 16.88 |
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.
Motilal Oswal Nasdaq 100 FOF
The Motilal Oswal Nasdaq 100 FOF ranks 1st based on its 5-year CAGR of 26.23%. It has the highest AUM among the 5 funds, at ₹6,586.76 crore, and an expense ratio of 0.24%, which is the lowest in the list.
The fund’s Sharpe ratio is 1.63, the highest among the 5 funds. Over the past 3 years, it has delivered a CAGR of 24.96%, which is also the highest in the list.
DSP US Flexible Equity FoF
The DSP US Flexible Equity FoF ranks 2nd with a 5-year CAGR of 17.57%. It has an AUM of ₹867.29 crore and an expense ratio of 1.49%, the highest in the list.
The fund’s Sharpe ratio is 1.18, ranking 4th among the funds. Over the past 3 years, it has delivered a CAGR of 16.15%, ranking 3rd in 3-year performance.
PGIM India Global Equity Opportunities Fund
The PGIM India Global Equity Opportunities Fund ranks 3rd with a 5-year CAGR of 17.20%. It has an AUM of ₹1,348.95 crore and an expense ratio of 1.42%, which is the 2nd highest in the list.
The fund’s Sharpe ratio is 0.95, the lowest among the 5 funds. Over the past 3 years, it has delivered a CAGR of 14.11%, ranking 5th in 3-year performance.
Franklin India Feeder – Franklin U.S. Opportunities Fund
The Franklin India Feeder – Franklin U.S. Opportunities Fund ranks 4th with a 5-year CAGR of 17.11%. It has an AUM of ₹3,748.66 crore and an expense ratio of 0.62%.
The fund’s Sharpe ratio is 1.34, ranking 3rd in the list. Over the past 3 years, it has delivered a CAGR of 15.54%, ranking 4th in 3-year performance.
Invesco India – Invesco Global Equity Income FoF
The Invesco India – Invesco Global Equity Income FoF ranks 5th with a 5-year CAGR of 15.59%. It has the lowest AUM among the 5 funds, at ₹25.99 crore, and an expense ratio of 0.86%.
The fund’s Sharpe ratio is 1.48, the 2nd highest in the list. Over the past 3 years, it has delivered a CAGR of 16.88%, ranking 2nd in 3-year performance.
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FoFs Overseas Funds FAQs
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