Fund of Funds

The structure adds a second layer of fees, so the cost to the investor is the sum of both levels — a detail often obscured because only the top-level expense ratio is prominently disclosed. Its legitimate uses are access and structure: international exposure that a domestic fund cannot hold directly, or gold and silver exposure through an ETF wrapper. In India the tax treatment depends on what the fund of funds holds, and the rules have changed several times, so the applicable treatment should be checked rather than assumed. The question to ask is whether the access it provides is worth the extra layer of cost.