Over the past few weeks, many readers have asked us, “Can I invest in Zerodha Multi Asset Passive FoF?” – A discussion.
Before we begin, it is worth noting that many investors appear to lack an understanding of the distinction between a passive fund and a passive fund of funds. A passive fund tracks a specified benchmark. This can be an index fund or ETF.
A passive fund of funds will invest in passive funds. It typically does not track any benchmark and can adjust the underlying passive funds as needed, typically with minimal churn. An active fund of funds can invest in active funds (or passive funds) and also actively change the underlying funds as per market conditions, etc.
Zerodha Multi Asset Passive FoF (allotment date: August 14, 2025) is an open-ended fund of funds scheme that invests in units of Equity, Debt Index Funds/ETFs, and commodity ETFs. Its current AUM is Rs. 30.13 Crores.
Readers who keep asking me if “Zerodha Multi Asset Passive FoF is the answer to a hybrid index fund?” should recognise that it is not. It can change underlying funds and will not track any benchmark (this should be clear from the scheme’s objective).
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The scheme has the following asset allocation mandate.
- Domestic Equity ETFs/Index Funds 50% to 70%
- Domestic Debt ETFs/Index Funds 10% to 20%
- Commodity ETFs 20% to 30%
- Debt Securities and Money Market instruments 0% to 5%
Its current portfolio (Aug 31st 2025 at the time of writing) is:
| Security | Holding(%) |
| Clearing Corporation Of India Ltd. | 1.4603 |
| Net Current Asset | -1.2674 |
| Zerodha Gold ETF | 25.4894 |
| Zerodha Nifty 100 ETF | 29.7278 |
| Zerodha Nifty 8-13 Yr G-Sec ETF | 15.0854 |
| Zerodha Nifty Midcap 150 ETF | 29.5045 |
The expense ratio is 0.18%, which is rather hefty for a fund of funds. The underlying funds have a TER of
- Zerodha Gold ETF 0.32%
- Zerodha Nifty 100 ETF 0.25%
- Zerodha Nifty 8-13 Yr G-Sec ETF 0.07%
- Zerodha Nifty Midcap 150 ETF 0.21%
That is a weighted underlying TER of approximately 0.22% plus the FOF’s TER.
A TER of just 0.07% to manage a gilt ETF, but a TER of 0.18% for the FOF to invest in your own ETFs* and rebalance from time to time? The fund house also claims, “To prevent unnecessary cost due to rebalancing, our investment strategy would be to maintain individual allocations within a 5% band of the proposed mix.”
* The fund can invest in other AMC ETFs or index funds (see below).
Then there is the benchmark: 60% Nifty 200 TRI + 15% CRISIL 10-year Gilt Index + 25% Domestic prices of Physical Gold (as per AMFI Tier I benchmark)
The Nifty 200 comprises approximately 80% large-cap stocks. The benchmark comprises approximately 48% large-cap stocks. The fund has only about 30% large cap and 30% Midcap (the benchmark only has about 12% exposure). Therefore, one should expect the fund to outperform the benchmark at times and underperform at other times. Therefore, as mentioned before, this is not a “passive fund” in the sense that it will not track any benchmark.
The scheme information document lists these funds as possible choices for the FOF.
– Zerodha Nifty 100 ETF
– Nippon India ETF Nifty 100
– LIC MF Nifty 100 ETF
– HDFC Nifty 100 ETF
– ICICI Prudential Nifty 100 ETF
– Zerodha Midcap 150 ETF
– Nippon India ETF Nifty Midcap 150
– HDFC Nifty Midcap 150 ETF
– ICICI Prudential Nifty Midcap 150 ETF
– Mirae Asset Nifty Midcap 150 ETF
– UTI Nifty Midcap 150 ETF
– Nippon India ETF Nifty 50 BeES
– SBI Nifty 50 ETF
– UTI Nifty 50 ETF
– HDFC Nifty 50 ETF
– ICICI Prudential Nifty 50 ETF
– Nippon India ETF Nifty Next 50 Junior BeES
– HDFC Nifty NEXT 50 ETF
– ICICI Prudential Nifty Next 50 ETF
– Zerodha Gold ETF
– Nippon India ETF Gold BeES
HDFC Gold ETF
– ICICI Prudential Gold ETF
– Kotak Gold ETF Fund
– SBI Gold ETF
– UTI Gold Exchange Traded Fund
– Zerodha Nifty 1D Rate Liquid ETF
– Zerodha Overnight Fund
– Nippon India ETF Nifty 8-13 yr Benchmark G-Sec – Long Term Gilt
– LIC MF Nifty 8-13 yr G-Sec ETF
– Mirae Asset Nifty 8-13 yr G-Sec ETF
– ICICI Prudential Nifty 10 yr Benchmark G-sec ETF
– Aditya Birla Sun Life CRISIL 10 Year Gilt ETF
– SBI Nifty 10yr Benchmark G-sec ETF
– UTI Nifty 10 yr Benchmark G-Sec ETF
– Nippon India ETF Nifty 5 yr Benchmark G-Sec
– ICICI Prudential Nifty 5 yr Benchmark G-SEC ETF
– Motilal Oswal Nifty 5-year Benchmark G-Sec ETF
– UTI Nifty 5 yr Benchmark G-Sec ETF
– Aditya Birla Sun Life CRISIL Broad-Based Gilt ETF
– Any other existing/ future schemes of Zerodha Mutual Fund and/ or other mutual fund(s) which
meet the objectives of the scheme
That is a comprehensive list, including 5Y gilt, 10Y gilt, and Nifty Next 50 schemes. The fund manager can add or replace funds from this list as needed. We expect the churn to be minimal.
We have three reasons why one does not need to invest in Zerodha Multi Asset Passive FoF.
1. As a thumb rule, avoid all fund of funds (FOF), especially those that invest in ETFs – particularly new ETFs. This is because the FOF NAV will track the ETF’s price. For most ETFs in India, particularly new, low AUM ETFs, there will be a significant difference between ETF price and NAV. This will affect the FOF. One can see this price-NAV disparity in a portal like ValueResearch. Except for the Zerodha Gold ETF, the others exhibit this disparity. Even if there is a good price-NAV disparity, sudden market events can cause noticeable changes. It is an unnecessary risk and best avoided.
2. Investors cannot shy away from portfolio management and rebalancing duties for their goals just because they see a fund like this bright and shiny on the shelf. This fund lacks sufficient fixed-income mandates. When gold/silver shines, everything looks bright, but the tide will turn, and then the risks will become clear. Even the fixed-income part is fairly risky, and most investors are unaware of the risks associated with gilt mutual fund investments. There is no escape from the responsibilities of portfolio management. You cannot simply buy one fund and assume everything is in order, regardless of your age (or perceived age).
3. Most investors tempted to invest in Zerodha Multi Asset Passive FoF should already be holding one fund too many in their portfolios. So they have more important things to worry about in their portfolios. For new investors, this fund is quite risky in our opinion, and we do not recommend it.
This is not a “one-fund portfolio”; in our opinion, it is way too risky. An index fund (not ETF) investing in 65-70% large-cap oriented equity (NSE 200 or 500) and 35-30% fixed income (medium-term about 5Y or so ) is a much better choice as a one fund portfolio for newbies. Such a fund does not exist today – We are still waiting for an Aggressive Hybrid Index Fund. Therefore, do not wait around and create your own equity and fixed income mix and learn the basics of goal-based portfolio management.
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