Fund Manager Talk | Multi-asset funds are about balance, not chasing gold: DSP MF’s Aparna Karnik

As gold and silver prices consolidate after a sharp rally, questions are emerging around the sustainability of investor interest in multi-asset strategies. Aparna Karnik, Fund Manager at DSP Mutual Fund, argues that the case for multi-asset allocation extends well beyond precious metals. She outlines how disciplined diversification, calibrated equity exposure and systematic rebalancing aim to deliver steadier, risk-adjusted outcomes across market cycles.

Edited excerpts from a chat:

How does the DSP Multi Asset Allocation Fund’s quantitative framework dynamically recalibrate exposures across domestic equity, global equity, debt, commodities and real assets to mitigate drawdowns while preserving upside participation? What is your current allocation mix, and how has that changed in the last one year?

If asset allocation is done well, it reduces the need to predict macro-outcomes and instead focuses on building a portfolio that can participate in growth while cushioning drawdowns. That philosophy guides our approach.


We operate within predefined exposure bands for each asset class, derived from long-term data on returns, volatility and correlations. Allocations typically move within these ranges, but we allow measured tactical shifts when valuations or risk-reward dynamics meaningfully change.

For instance, we keep overall equity exposure closer to ~50% when valuations are stretched and increase it toward ~70% when earnings visibility and margin of safety improve. Within equities, we actively allocate across sectors and geographies to enhance alpha and manage risk.

We maintain 10–30% in high-quality fixed income to provide stability and benefit from accrual and potential capital gains during slowdowns. Income-generating real assets like REITs and InvITs add yield with growth optionality. Commodities, typically 15–20%, largely precious metals, serve as a hedge during inflationary or systemic stress.

Over the past year, equity exposure has remained closer to 50%, with a large-cap tilt. We trimmed precious metals after a strong rally as part of disciplined rebalancing, and increased allocation to REITs and InvITs where yields and total return potential appeared attractive.

With gold and silver moderating, could multi-asset funds lose appeal?

Commodity cycles are inherently volatile. Sharp rallies are often followed by periods of consolidation or correction - that is the nature of the asset class.

The case for multi-asset investing, however, is not built on the recent performance of any one asset, whether gold, equities or debt. It is built on diversification. The objective is to combine assets that behave differently across cycles so that the portfolio’s overall journey is smoother and more resilient.

Short-term moderation in bullion prices does not dilute the structural role commodities play within a diversified portfolio. Multi-asset funds are designed for investors who prioritise consistency of outcomes over chasing the best-performing asset of the moment.

What is your quant model signalling on gold and silver? How did you handle the recent drawdown?

After the sharp rally in precious metals, our framework indicated stretched positioning, and we trimmed exposure as part of prudent profit-booking. That said, even well-sized allocations will reflect short-term volatility when corrections occur.

We view such drawdowns as an inherent part of investing. Our focus is on appropriate sizing and disciplined rebalancing rather than attempting to precisely time peaks or troughs, something that is extremely difficult to execute consistently. The goal is risk management and long-term compounding, not short-term perfection.

How do you assess currency risk and global valuation cycles?

Our approach to international equities is rooted in diversification across countries, sectors and currencies. Rather than making concentrated calls on a single geography or currency, we spread exposure across markets such as the US, Europe, Japan and parts of Asia.

This multi-country, multi-sector approach reduces the impact of valuation excesses or currency movements in any single market. Over time, currency cycles tend to mean-revert, and global diversification enhances portfolio resilience while expanding the opportunity set beyond domestic markets.

What filters do you apply for REITs and InvITs?

We focus on three pillars: sponsor quality, asset stability and income visibility.

We prefer platforms backed by strong sponsors with portfolios of high-occupancy, income-generating assets that offer revenue visibility and growth potential. Distribution, yield sustainability, and the ability to grow that yield are critical.

From a portfolio construction standpoint, we view REITs and InvITs as sitting between debt and equity in terms of risk and return. When their total return potential meaningfully exceeds debt yields and equity valuations appear less compelling, they become attractive within a multi-asset framework.

Do multi-asset strategies structurally outperform in sideways markets?

It’s difficult to generalise because outcomes depend on how different asset classes behave in that phase. Recently, we saw periods where equities underperformed while other asset classes delivered strong returns — naturally benefiting multi-asset strategies.

Over longer horizons, disciplined multi-asset frameworks tend to deliver healthier compounding with lower volatility compared to pure equity portfolios. The edge comes not from market timing, but from structured diversification and systematic rebalancing.

How should investors position multi-asset funds?

We believe multi-asset allocation funds are best viewed as a core portfolio allocation for long-term investors.

Their design, blending growth, income and diversification, makes them well-suited to investors seeking balanced participation across cycles without having to actively manage cross-asset shifts themselves.

What is your base-case outlook across asset classes over the next 12–18 months, and which allocation bucket currently offers the most attractive risk-adjusted opportunity?

After the strong returns seen across several asset classes in recent years, we believe return expectations should be moderated. That said, opportunities still exist, particularly through disciplined, bottom-up stock and sector selection within equities.

Rather than relying on broad asset-class expansion, we expect returns to be more differentiated and driven by fundamentals. In such an environment, diversification and active selection become even more important.