Fund of Funds

POSTED BY Anuj Kapila ON April 1, 2013 5:26 pm COMMENTS (13)

Hi,

have come across the Quantum fund of funds. seems interesting for novices.

Can i have your comments please. 

13 replies on this article “Fund of Funds”

  1. sadashiv kashyap says:

    Afraid for misname Mr. Ashal.

    thank you Mr. Ramesh for showing me mirror.

  2. Dear Ramesh, well done. I was coming to this thing after solving the taxation issue. Dear Sadashiv, hope the expense thing is also clear to you now. Just one more thing to add – My name is Ashal not Anshal. ūüôā

    Thanks

    Ashal

  3. sadashiv kashyap says:

    Thanx a ton MR. Anshal,Ramesh,pattu
    I was wrong.ALL FOF fall under debt category there 65% equity fund of fund rule is irrelevant
    very well elaborate Mr. Anshal Money isn’nt directly invested in Indian equity .

    Ramesh My intention was only to say if he opt any two scheme like hdfc top 200 or bsl frontline equity he will incur 3% approximate expenses ratio.

    But I was’nt aware of in FOF 65%I RULE is irrelevant.
    I had thought this rule also applicable on FOF.
    here tax implication after one year he can think a better return in equity mf .

    really jagoinvestor platform really help to enlightenment.

    I am taking back my comment quantum equity fund of fund wont be exempt after one year Anuj so keep in my tax consequence before investing.

    Again thanking you Mr Anshal hats off your knowledge.

    1. Ramesh says:

      Sorry but wrong again. Let me explain.

      1. Situation 1. A person invests in HDFC Top 200 and BSL frontline equity through a distributor, in equal amounts.
      total weighted average expense ratio will be average of 1.78 and 1.86 = 1.82.

      2. Situation 2. If he does it directly, then approx. his total weighted average expense ratio should be around 1.2-1.3%.

      3. If he puts the entire amount into quantum Fof, then add 0.75% to 1.82 = 2.57% effective rate.

      this is entirely separate from taxation issues.
      Hope this is clear.

  4. Dear Sadashiv, Fund of Funds are treated as debt fund for taxation purpose as per income tax of India. The rule is very simple to be eligible for an Eq. fund. Any fund investing at least 65% or more in listed Indian Eq. directly is called Eq. fund (almost all balanced funds also now follow this %age for the tax advantage). In case of Fund of Funds, the money is not invested directly into Indian Eq. hence these are classified as debt fund for taxation purpose.

    Thanks

    Ashal

  5. Dear Anuj, Quantum Eq. FoF may be good on performance but due to taxation issues, this my not be the best choice. I w’d stick still with pure Eq. fund – Quantum Long Term Eq. or HDFC Balanced as proposed by dear FFC.

    Thanks

    Ashal

  6. Just realized quantum multi-asset fund has less than 65% equity so it will taxed like a debt fund. So long term capital gain (more than 1 year) is not tax-free.

    A better option will be a balanced fund like HDFC balanced to start with

    1. Ramesh says:

      Any fund of funds will be taxed like a debt fund, whatever be the underlying asset classes. Eg, even quantum equity fof will be treated like debt fund.

      1. Thanks. I didn’t know that.

      2. sadashiv kashyap says:

        Dear Anuj FYI,

        ALL FOF doesn’t mean they are treated as debt fund.fund have invested 65% in equity(indian co.)so it will treated as equity fund not FOF for tax component.
        Quantum equity fund of fund will be exempted if u hold them more than one year.
        Assets allocation are As follows
        1 HDFC Top 200 Direct  Mutual Funds-Equity 18.42
         2 DSPBR Equity Direct  Mutual Funds-Equity 17.82
        3 HDFC Equity Direct Mutual Funds-Equity 17.32
        4 Birla Sun Life Frontline Equity Direct Mutual Funds-Equity 16.13
        5 Canara Robeco Equity Diversified Regular Direct  Mutual Funds- Equity 15.97
        6 Sundaram Select Midcap Reg Direct Mutual Funds-Equity 13.37
        7 Others  CBLO0. 72
         8 Others Net Receivables 0.25

        expenses Ratio-0.75%

        All Six fund have given best return with great assets allocation.
        hdfc equity 200 n hdfc equity portfolio have little bit difference.
        why u should choose these fund bz it gives u diversification in best scheme.If u select any two fund individually u will suffer 3% expenses ratio may be more.it is advisable go for it rather than receive two or three different account statement and more transaction cost.

        It will treated as equity fund not fund of fund alike debt fund .

        needn’t to worry you are thinking right thing go for it.
        I respect Mr. Anshal and other reader views.correct it if I am wrong.

        1. Sadashiv,

          Ramesh is right. ALL FOF irrespective of where they invest are treated as debt fund for tax purposes. There are many sources on the web which support this.

        2. Ramesh says:

          Check this out.

          http://www.quantumamc.com/FAQ/Taxation.aspx

          Are you saying, if a person invests in equity FoF he will incur lesser charges, while if he invests directly he will incur 3% expenses ratio? Check you facts, seriously.

  7. Instead of quantum equity FOF I will simply choose quantum long term equity.

    Quantum multi-asset fund which invests in equity debt and gold can be good choice for
    beginners since it will rebalance the portfolio automatically

    Returns will lower but so will risk

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