In the previous section, we discussed the two-layer structure of feeder funds. One fund is in India and routes money abroad, and another fund overseas holds the actual portfolio of global stocks. Because of this structure, there are costs at both levels.

So, then the question is whether this makes a meaningful difference to investor returns.

Let us start with the example we discussed earlier.

The Edelweiss US Technology Equity Fund of Fund charges a total expense ratio of about 1.51% per year on the direct plan. The regular plan costs around 2.34%. The difference between these two plans mainly reflects distribution commissions.

Even a difference of about 1% per year between direct and regular plans may not appear large at first. But over longer investment periods, these 1% compound and gradually create a noticeable difference in the final value of the investment.

Looking across international feeder funds more broadly, the total expense ratios typically fall in the range of about 1.5 to 3% per year, depending on the underlying fund and the structure used.

To make this easier to visualise, consider a simple example.

If you invest ₹10 lakh in a feeder fund with a 2% expense ratio, the annual cost would be roughly ₹20,000. As the investment grows over time, the absolute amount paid in fees also increases.

This does not automatically make feeder funds unattractive. They provide a convenient and regulated way for Indian investors to access global funds that may otherwise be difficult to invest in directly.

However, it helps to see these costs in context.

Domestic equity index funds in India often charge around 0.1 to 0.2%, while actively managed Indian equity funds typically charge between 0.5 and 1.5%.

International feeder funds, therefore, tend to sit toward the higher end of the cost spectrum, largely because of the additional layer involved in accessing global markets. Understanding this structure helps investors evaluate the trade-offs more clearly when comparing different routes to global investing.