Family of Funds

A family of funds refers to the set of mutual funds managed by a particular investment management company.
Family of Funds
3 min
07-June-2024

A fund family includes all individual funds managed by a single investment company. For example, all mutual funds offered by Company A, constitute one fund family. To understand the meaning of a family of funds, it is important to begin with the concept of mutual funds. A mutual fund is an investment product that lets investors invest in a diverse group of shares, securities, and bonds. Through this diversified approach, investors ensure that the risks are minimised and liquidity is high.

A family of funds is borne from the same idea of minimising risks while ensuring high liquidity. It is a diverse group of mutual funds offered and managed by a single company. In other words, the mutual funds in the family have different investment objectives and offer increased diversification. However, they are managed by a single company, thus sharing the management vision and strategies.

What is a family of funds?

A group of mutual funds, like debt funds, equity funds, value funds, and stock funds, offered and managed by a single investment company is called a family of funds. Each mutual fund in the family consists of different groups of stocks, bonds, and securities, thus providing greater diversification, which is essential for reducing risks.

The only common thread among these mutual funds is the single entity that manages them, called a fund house or an Asset Management Company (AMC). There are 44 fund houses and AMCs in India which are registered with the Association of Mutual Funds in India.

Example of family of funds

A family of funds is a group of mutual funds managed by a single asset management company that offers a range of investment options to cater to different risk profiles and investment objectives. This type of fund family typically includes a variety of schemes across various asset classes, such as equity, debt, and hybrid funds.

Each scheme within the family has its own investment objective, risk profile, and target audience, allowing investors to choose the most suitable option based on their financial goals and risk tolerance. This approach provides investors with a one-stop solution for their investment needs while benefiting from economies of scale and shared resources within the asset management company.

Pros of investing with one fund family

The advantages of investing in a family of funds revolve around diversity, cost-effectiveness, and shared management.

Convenience

Investing in a single-fund family provides a more streamlined research and investment process. The top fund families typically offer a wide range of investment options across various asset classes and investment strategies, allowing investors to easily find suitable options within their preferred fund family. This can reduce the time and effort required to build and manage a diversified portfolio.

Diversity

By investing in a family of funds, investors enjoy the benefit of a diversified investment portfolio with minimum effort. This way, investors can invest in a wide range of shares, bonds, and securities across different sectors and asset classes.

Management

By investing in a family of funds, individuals can benefit from shared management as the monitoring and managing teams operate with shared operational strategies and efforts.

Costs

By investing in a family of funds, investors can save on fees and other expenses they would incur had they invested in mutual funds managed by different fund houses.

Cons of investing with one fund family

Investing solely within a single-fund family can have some potential drawbacks:

Potential for limited diversification

Smaller fund families may hold many of the same stocks across their various actively managed funds. If an investor does not thoroughly review the holdings of each fund before investing, they could end up with an over-concentration in a single stock or sector. This lack of diversification can increase the portfolio's risk exposure.

Potential for quick decisions

Investors may be tempted to make quick investment decisions based on the assumption that if one fund in the family performs well, the sibling funds will also perform well. This can lead to hasty, unresearched trades that the investor may later regret. It is important to conduct thorough research on each fund's performance and holdings before making any investment decisions, even within a single fund family.

Overall, while the convenience and cost benefits of investing within a single fund family can be appealing, investors must be mindful of the potential drawbacks and take steps to ensure adequate diversification and well-researched investment decisions.

How to research for a family of funds?

Now that you are well versed in what a family of funds is, any research to find the most suitable one depends on your investment choices and objectives. An investor should foremost look into the past performance of the family in managing the funds. Based on the investment objectives, they can also look for diversification of funds that the fund house is managing.

How to choose the right family of funds for your portfolio?

You can choose the right family of funds by considering the following:

  • Company’s background and reputation: The first thing to look at is the background and reputation of the company managing the funds. You should look at the company’s background for evidence of its trustworthiness, business acumen, and whether it has lived and learnt through the crises. The reputation of the company is an important indicator for investors to take the first step.

  • Check the funds: If the company’s background and reputation do not throw any red flags, an investor should look for how well its funds are doing. The performance of funds is an essential criterion for choosing the right fund house.

  • Fees: Ultimately, the decision is made based on the fees and expenses sought by the fund house. You should look for a company that charges fees that meet your investment objectives.

Conclusion

Now that you have gone through the family of funds' meaning and its various features, you can decide and pick this investment product based on your investment objectives and risk tolerance level. The Bajaj Finserv Mutual Fund Platform can help you find the ideal category of mutual funds and alternative investment funds for your portfolio. You can check out 1,000+ mutual fund schemes and start a SIP investment or make a lump sum investment in any fund you choose.

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Frequently asked questions

What is the meaning of family of funds?

Family of funds mean a group of mutual funds managed by a single company.

What is the best family of funds?

The best family of funds depends on investor’s investment objective and risk tolerance capacity.

What are the advantages of a family of funds?

The advantages of family of funds are that they offer diversity, integrated management, and is cost-effective.

What is a fund family for mutual funds?

The fund family for mutual funds is that company that monitors and manages them.

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Disclaimer

Bajaj Finance Limited (“BFL”) is an NBFC offering loans, deposits and third-party wealth management products.

The information contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. 

This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.