Mutual Fund Corner: Understanding international exposure through fund of funds

International funds have been in focus recently. In February, Sebi asked Indian fund houses to stop investing in international funds, which are basically stocks or debt instruments of companies registered and listed outside India.

This is because that $7 billion limit was hit by mutual funds with respect to international investments. In June, this rule was relaxed. Sebi asked funds to resume subscription and make investments in overseas funds and securities as well.

Overall limit of $7 billion is still there which was fixed for international investments. ETFs have an additional limit of $1 billion. There was a sharp decline in global market stocks and that is the reason why this relaxation was seen in the month of June.

But not all international funds were able to use this limit, because most of the schemes did not see this redemption.

CNBC-TV18 spoke to Feroze Azeez, Deputy CEO at Anand Rathi Wealth to understand what are international funds and how can one take international exposure through fund of funds.

On fund of funds, Azeez said, “Fund of funds can actually be of five different categories. It's not just the international fund of funds. You can have domestic fund of funds, an asset locator fund of funds, gold fund of funds and also fund of funds that invests in ETFs."

He added, “One can invest sitting here but it subsequently means cutting more cheques. There's of course going to be two layers of fee for it because there are two professionals involved or two companies involved.”