When most people think about investing globally through mutual funds, they assume it works exactly like a regular Indian equity fund. You choose a fund, invest money, and the fund manager buys international stocks on your behalf.

That understanding is broadly correct. However, there is an important detail that often gets overlooked.

International mutual funds available in India are not all operated or managed in the same way. They generally fall into three different structures, and each behaves quite differently.

The first type is a Fund of Funds, commonly called a feeder fund. These funds do not buy stocks directly. Instead, they invest in an overseas mutual fund that holds the underlying portfolio.

For example, the Motilal Oswal Nasdaq 100 Fund of Fund invests in the Nasdaq 100 ETF, which tracks companies like Apple, Microsoft, Amazon, and Nvidia. Similarly, the DSP Global Innovation Fund of Fund invests in the Baillie Gifford Global Discovery Fund.

The second type is international ETFs listed in India. These ETFs trade on Indian stock exchanges like regular stocks and track global indices.

For example, the Motilal Oswal Nasdaq 100 ETF tracks the Nasdaq 100 index, and the Nippon India ETF Hang Seng BeES tracks the Hang Seng Index.

The third type is domestic funds that hold partial international exposure. These are primarily Indian equity funds but allocate a portion of their portfolio to global companies.

For instance, the Parag Parikh Flexi Cap Fund invests mostly in Indian stocks but also holds a limited allocation to global companies such as Alphabet and Microsoft.

At first, all three options provide global exposure. But the structure behind them is different.

The costs are different and how easily you can invest in them changes over time.

Treating all international mutual funds as one category often creates confusion.

Before we go deeper into how each type works, there is one important constraint that affects most international mutual funds in India.