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Mumbai – HDFC Mutual Fund, one of India’s leading asset management companies, has announced the launch of its latest offering, the HDFC Diversified Equity All Cap Active Fund of Fund (FOF). The New Fund Offer (NFO) opens on September 10, 2025, and will close on September 24, 2025.
This new scheme is designed as an open-ended Fund of Fund, which will invest in units of equity-oriented mutual fund schemes across market segments — large-cap, mid-cap, and small-cap categories. The objective is to provide investors with a single-window access to a diversified equity allocation through active management and disciplined portfolio rebalancing.
Mutual fund investors often struggle with the challenge of choosing and rebalancing between large-cap, mid-cap, and small-cap funds depending on market cycles. While large-cap funds generally offer stability, mid- and small-cap funds can generate higher returns but with added volatility.
The HDFC Diversified Equity All Cap Active Fund of Fund simplifies this decision by allocating investments dynamically across all three market caps within one structure. This framework-driven approach can potentially help investors avoid the complexities of rebalancing portfolios themselves and reduce the tax liabilities that might arise from frequent buying and selling of individual funds.
In essence, the fund aims to provide diversification, disciplined allocation, and reduced operational hassle in one single investment avenue.
Benchmark and Strategy
The fund will be benchmarked against the NIFTY 500 Total Return Index (TRI), which represents a comprehensive universe of Indian equities across market segments. By aligning itself with this benchmark, the fund reflects its diversified approach to capture opportunities across the full spectrum of India’s equity market.
The investment strategy involves:
Active selection of underlying equity schemes run by experienced fund managers.
Dynamic rebalancing across market caps based on market conditions and valuations.
Risk-adjusted diversification, aiming to smoothen returns over different market cycles.
Key Features of the NFO
NFO Period: September 10 – September 24, 2025
Minimum Investment: ₹100 during NFO and continuous offer period
Plans Offered: Direct Plan and Regular Plan
Options: Growth and IDCW (Income Distribution cum Capital Withdrawal)
Exit Load: 1% on redemption/switch-out within one year from allotment; no exit load thereafter
Benchmark: NIFTY 500 (TRI)
Fund Manager: Srinivasan Ramamurthy, Fund Manager at HDFC AMC
Who Should Invest?
This fund is suitable for investors who:
Seek diversified equity exposure across large, mid, and small caps without the need to track and rebalance multiple funds.
Want long-term wealth creation through active management and disciplined asset allocation.
Prefer a professional, tax-efficient structure that takes care of rebalancing internally.
Are comfortable with equity risk and market volatility.
Since this is an equity-oriented Fund of Fund, investors should ideally have an investment horizon of at least 5 years to benefit from the growth potential of equities.
Taxation
The fund will be treated as a non-equity fund for taxation purposes since it invests in other mutual funds rather than directly into equities. This means:
Short-Term Capital Gains (STCG): Taxed as per individual income tax slab if units are redeemed within 3 years. Long-Term Capital Gains (LTCG): Taxed at 20% with indexation benefit if units are redeemed after 3 years. Investors should consult their financial advisors to understand tax implications based on their profile.
Expert Insights
Market analysts note that the timing of this launch is significant. With Indian markets witnessing high volatility in the small- and mid-cap segments but steady performance from large caps, a balanced allocation strategy becomes crucial for investors seeking stability along with growth opportunities.
Commenting on the launch, HDFC AMC stated:
“The HDFC Diversified Equity All Cap Active Fund of Fund is designed to simplify the investment journey for investors. By offering a single equity allocation strategy across market capitalizations, combined with disciplined rebalancing, the fund can help investors stay invested through market cycles while reducing operational complexities and potential tax liabilities.”
Why Fund of Fund Structure?
A Fund of Fund (FOF) structure offers investors indirect exposure to multiple schemes managed by different fund managers, thereby increasing diversification. Instead of picking individual funds, investors get the benefit of an actively managed basket under one umbrella.
In the case of this scheme, HDFC AMC brings its experience and proven track record in equity management while giving investors all-cap exposure through one product.
Conclusion
The launch of the HDFC Diversified Equity All Cap Active Fund of Fund reflects the growing demand for simple yet diversified investment solutions. With a low entry point of just ₹100, investors across categories — from first-time investors to seasoned ones — can participate in the fund.
For those seeking long-term equity exposure with a disciplined rebalancing approach, this fund could serve as a convenient solution. However, investors must keep in mind the risk profile, tax treatment, and long-term horizon before investing.
As the NFO window opens on September 10, 2025, retail investors and advisors will be watching closely to see how this new offering fits into India’s evolving mutual fund landscape.
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