An Introduction to Multi Asset Passive Fund of Fund (FoFs)

Investors often seek diversification to manage risk, but building and maintaining a portfolio across different asset classes can be complex. The Multi Asset Passive fund provides an exposure to various assets through a single fund that invests in other passive mutual fund schemes.

How Does This Fund Work?

A multi asset passive FoF is a mutual fund that builds its portfolio by investing in other passively managed funds, such as index funds and Exchange Traded Funds (ETFs), across multiple asset classes. The multi asset passive FoF allocates the pooled capital into a mix of passive funds that track each of the different asset classes. For example, the fund might invest in:

• An equity index fund tracking the Nifty 50.
• A debt index fund tracking a government securities index.
• A gold ETF that tracks the price of physical gold.

Key Advantages

• Streamlined Diversification: The core benefit is gaining exposure to a diversified portfolio of multiple asset classes through a single transaction. 
• Simplicity: You only need to track and manage one fund instead of many.
• Tax Efficiency: The internal rebalancing done by the fund does not trigger any capital gains tax for the investor. Investors are only taxed when they decide to redeem their units of this fund.

A Tool for Portfolio Construction

These funds are well-suited for investors who are looking for a simple way to achieve broad asset allocation without the need to select and monitor multiple individual funds. . They are particularly useful for those who prefer a disciplined approach to long-term investing. While they make diversification easier, investors should still evaluate how such funds align with their overall financial goals and risk profile. 

Mutual Fund investments are subject to market risks, read all scheme related documents carefully

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Please consult your tax advisor before investing in view of the individual nature of the implications.

Published on 08th Aug, 2025