Mutual funds' search for debt fund alternatives has reached the fund of fund (FoF) space with at least two fund houses — HDFC and Aditya Birla Sun Life (ABSL) — seeking the regulator's nod to launch FoFs that can offer debt fund-like returns but with better tax efficiency.
Fund houses have been exploring new low-risk product possibilities since the change in taxation in April 2023 when debt funds lost the tax advantage (indexation benefit). Few fund houses like Edelweiss and PPFAS took the hybrid fund route to fill the gap by creating tax-efficient lower-risk products.
