How FOFs Work
Instead of creating an offshore brokerage account, changing INR to USD, and buying a foreign ETF directly, you buy into an Indian Mutual Fund in INR. This Indian AMC then pools the money and legally buys the foreign ETF on your behalf.
Key Guidelines
- LRS Not Applicable: Under the Liberalised Remittance Scheme (LRS), you can only remit up to $250k abroad. FOFs bypass this because the transaction stays in India.
- Double Expense Ratio: You inherently pay a tiny fee to the Indian AMC and to the foreign ETF manager, but it is heavily regulated to be cost-effective.