Worst performing FoFs with negative or less than 1% return:There is market risk associated with investing in mutual funds and hence investing money in them does not always yield profits. You must have heard this thing often, but here we are going to give you a concrete example of this. There are 11 schemes falling in the category of fund of funds, whose average annual return (CAGR) for the last 3 years has been either negative or less than 1 percent. The 3-year average return of the regular plan of the worst performing scheme was minus -8.42%. This information has come to light by analyzing the data available on the website of Association of Mutual Funds of India (AMFI).
With these 11 fund of funds giving negative or negligible returns in 3 years, it is also understood how important it is to choose the right mutual fund for investment and why complete caution should be taken while doing so. We will see the list of these 11 funds later, but first let us know what is called fund of funds.
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What are FoF?
Fund of Funds (FoF) is an investment strategy that invests in units of other mutual funds instead of investing directly in stocks, bonds or other securities. These types of funds are also called multi-manager investments because they invest in funds managed by multiple fund managers.
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Worst performing FoF in 3 years
Name of FoF / Last 3 Years Average Return (CAGR)
-
Invesco India – Invesco Global Consumer Trends FoF :
-8.42% (Regular Plan), -7.51% (Direct Plan)
-
Edelweiss Greater China Equity Off-shore Fund :
-8.35% (Regular Plan), -7.50% (Direct Plan)
-
PGIM India Emerging Markets Equity Fund :
-6.55% (Regular Plan), -5.51% (Direct Plan)
-
Axis Greater China Equity FoF
-5.29% (Regular Plan), -4.23% (Direct Plan)
-
Mahindra Manulife Asia Pacific REITs FoF
-4.09% (Regular Plan), -3.14% (Direct Plan)
-
Edelweiss Emerging Markets Opportunities Equity Offshore Fund
-3.78% (Regular Plan), -2.92% (Direct Plan)
-
HSBC Global Equity Climate Change FoF
-1.22% (Regular Plan), -0.49% (Direct Plan)
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HSBC Global Emerging Markets Fund
-0.88% (Regular Plan), -0.18% (Direct Plan)
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DSP Global Clean Energy Fund of Funds
-0.36% (Regular Plan), -0.25% (Direct Plan)
-
Kotak International REIT FOF
-0.19% (Regular Plan), 0.70% (Direct Plan)
-
Kotak Global Emerging Market Fund
0.30% (Regular Plan), 0.81% (Direct Plan)
(Source: AMFI)
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What do these 11 FoF have in common
All these 11 fund of funds giving negative or negligible returns have one thing in common – they all focus on investing in international markets. These FOFs invest in funds that focus on foreign mutual funds and funds that invest in equity, debt, ETFs of foreign companies. Obviously, they are more affected by the fluctuations in foreign markets, which can be a major reason for their negative or very low returns.
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Risks associated with international funds
, Foreign Politics and Economy: There is a risk of political instability and changes in economic policies when investing in international markets. If any country changes its policies related to the investment of these funds, then it can have a direct impact on these FoFs.
– Effect of foreign exchange rates:Due to their focus on investing abroad, these fund of funds are more likely to be affected by fluctuations in foreign exchange rates.
Overall, the data of these 11 fund of funds once again reminds us that mutual funds do not always yield profits and if the investment is linked to foreign markets, the risk can be high. This is the reason why investors should understand all the risk factors thoroughly before making their investment and only then choose the right fund for themselves.
(Disclaimer: The purpose of this article is only to provide information, not to give advice on whether or not to invest in any fund. Take any investment decision only after taking the advice of your investment advisor.)