This study attempted to evaluate the performance of fund of funds on the basis of risk-adjusted methods. The performance of fund of funds were compared with the risk free returns as well as the benchmark index (BSE 100), which was taken as the proxy for the market returns. Samples were collected from the AMFI websites and respective AMC websites from April 1, 2007 to March 31, 2014 and the returns were calculated from the respective schemes' NAV price. The methods used in the study is risk adjusted tools of Sharpe ratio, Treynor ratio, and Jensen alpha. An analysis performed on the sample of equity oriented fund of mutual funds showed that all the fund of funds in the sample earned negative returns in excess of the risk free rate of return offered by 91 days treasury bill. The comparison of rates of return of the benchmark index and the sample of fund of funds indicated that majority of the equity fund of funds included in the sample had underperformed the benchmark. Such results might be because of double layer of fees. The results revealed that the performance of fund of funds had posted a negative Sharpe, Treynor, and Jensen alpha. The underperformance of fund of mutual funds strongly explained the double layer of fees.

1. Bhootraa, A., Dreznerb, Z., Schwarzc, C., & Stohs, M. H. (2015). Mutual fund performance : Luck or skill? International Journal of Business, 20 (1), 53 - 63.
2. Friend, I., Blume, M., & Crockett, J. (1970). Mutual funds and other institutional investors. New York : McGraw-Hill.
3. Grinblatt, M., & Titman, S. (1989). Mutual fund performance: An analysis of quarterly portfolio holdings. Journal of Business, 62 (3), 393-416.
4. Gupta, O. P., & Sehgal, S. (1997). Investment performance of mutual funds: The Indian experience in Indian capital market -Trends and dimensions. Mumbai : Tata McGraw-Hill Publishing Company Ltd.
5. Jagric, T., Podobnik, B., Strasek, S., & Jagric, V. (2007). Risk-adjusted performance of mutual funds: Some tests. South-Eastern Europe Journal of Economics, 2 (1), 233-244.
6. Jensen, M. C. (1968). The performance of mutual funds in the period 1945 - 1964. The Journal of Finance, 23 (2), 389-416.
7. Lee, C. F., Lee, J. C., & Lee, A. C. (2000). Statistics for business and financial economics (Vol. 1, p. 712). Singapore: World Scientific.
8. Mishra, B., & Rahman, M. (2001). Measuring mutual fund performance using lower partial moment. Global Business Trends, Contemporary Readings (2001), 385-393.
9. McDonald, J. G. (1974). Objectives and performance of mutual funds: 1960 - 1969. Journal of Financial and Quantitative Analysis, 9 (03), 311-333. DOI: <a href=http://dx.doi.org/10.2307/2329866 target="_blank">http://dx.doi.org/10.2307/2329866</a>
10. Naz, S., Mustafa, A. U., Mukhtar, A., & Nawaz, S. (2015). Risk adjusted performance evaluation of balanced mutual fund schemes in Pakistan. European Journal of Business and Management, 7(1), 179-187.
11. Rohitraj, S., & Rao, D. H. (2015). Evaluating the performance of open ended large cap equity mutual fund and mid and small cap equity mutual fund growth scheme with special reference to SBI mutual fund and HDFC mutual fund. IOSR Journal of Business and Management, 6 (1), 35-41.
12. Sharpe, W. F. (1966). Mutual fund performance. The Journal of Business, 39 (1), 119-138.
13. Sondhi, H. J., & Jain, P. K. (2006). Can growth stocks be identified for investments : A study of equity selectivity abilities of fund managers in India. The ICFAI Journal of Applied Finance, February 2006, 17-30.
14. Stopp, C. (1988). Financial times guide-unit trust. Financial Times Business Information Series, 3-89.
15. Treynor, J. L. (1965). How to rate management of investment funds. Harvard Business Review, 43 (1), 63-75.
16. Vasantha, S. (2013). Evaluating the performance of some selected open ended equity diversified mutual fund in Indian mutual fund industry. International Journal of Innovative Research in Science, 2(9), 4735- 4744.