Investors seeking stable play turn to multi-asset funds

Mumbai: Flows into multi-asset allocation funds (MAAFs) have gathered pace, with rising investor interest pushing many portfolios to adopt these schemes as a core holding. Wealth managers say the category's ability to dynamically shift across asset classes while cushioning volatility is drawing investors looking for a more stable all-weather allocation.

Data from mutual fund industry body AMFI show assets under management of multi-asset funds surged 72% over the last year to ₹1.75 lakh crore amid a decline in returns from plain-vanilla equity schemes.

"A multi-asset scheme gives an investor exposure to three asset classes, and the fund has the flexibility to move across asset classes, with no tax implication on investors. These benefits and low volatility are making it a core portfolio holding for many investors," says Juzer Gabajiwala, director, Ventura Securities.


As per Value Research, multi-asset funds delivered 23% over the last year, as against the Nifty 50 that returned 14.27%. The key drivers of returns for the fund category have been silver and gold. which have run up 171% and 81%, respectively, in the last year.

"These funds work well for investors who do not have the resources or the discipline to do asset allocation themselves to reduce volatility; there is automatic rebalancing," says Vineet Nanda, founder, SIFT Capital. For example, if equities move up, they need to cut exposure to equities and reallocate to fixed income or precious metals and vice versa.

Financial planners said investors must choose the appropriate multi-asset product as funds in the category are managed differently. One set of multi-asset funds has a 65% allocation to equity and arbitrage, with the balance split between fixed income and precious metals, making them eligible for long-term capital gains (LTCG) tax after one year.