Multi asset allocation mutual funds consistently outperform: Ventura Securities

Multi-asset allocation funds have outperformed the majority of general equity schemes in one, three- and five-years span. These funds stand out for their capacity to deliver competitive returns across multiple asset classes, providing a diversified investment approach that many single-asset equity funds lack.

The performance of 25 multi-asset funds was done, according to a report by Ventura Securities.

Multi Asset Allocation Funds are gaining popularity due to their ability to diversify across asset classes, offer tax benefits, and deliver better risk-adjusted returns, said the report.


“Some Multi Asset Allocation Funds have outperformed most equity schemes, and all of this underlines the potential benefits of these funds. Ventura Securities' analysis of multi-asset funds underscores their potential benefits, including robust returns. These funds offer attractive options for investors seeking balanced risk-reward profiles,” said Juzer Gabajiwala - Director - Ventura Securities.

“However, the varied performance emphasizes the importance of selecting funds aligned with individual investor objectives and risk tolerance, reinforcing the notion that "one size does not fit all" in multi-asset allocation,” he added.

The report highlighted that the multi asset fund from Quant AMC has shown a notable performance, outperforming approximately 79% of equity schemes based on its 3-year returns and 86% over a 5-year period.

ICICI Prudential Multi Asset excelled, outperforming 63% of equity schemes' returns over a 3-year period and nearly 50% over a 5-year timeframe.

The allocation strategies that exist across 25 multi-asset allocation funds show a huge variation, heavy on equity and debt along with a mix of gold and silver, arbitrage and other alternative assets. This diversity underscores the fact that "one size does not fit all" as each fund follows a distinct strategy tailored to different market conditions and investor objectives, according to the report.

Some funds have outperformed large-cap funds by delivering higher returns with lower associated risk. WhiteOak delivers solid returns with minimal risk, showcasing a risk-reward ratio of 16.6 compared to the large cap’s 2.8. Its diversified asset mix - spanning Gold, Equity, Debt, REITs, and INVITs- effectively spread risk.

Quant has a slightly lower risk-reward ratio of 16.4, closely matching WhiteOak. However, it carries higher risk due to its greater equity allocation, though it maintains a diversified portfolio. DSP and Shriram, with low risk-reward ratios of 7.3 and 7.0, respectively, deliver decent returns but entail relatively high risk.

This highlights that some funds are more effective at optimizing returns for each unit of risk taken. Therefore, it’s important to select a fund that aligns with your preferred balance of risk and reward.

The conservative funds that have equity exposure of less than 35% and moderately aggressive funds include funds with equity exposure of around 35-65%. Aggressive funds are the funds with more than 65% equity exposure.

These funds are ideally suited for first time investors; funds for retirement and education goals etc. These fund strategies can benefit individuals nearing retirement who are focused on building a stable corpus for their post-retirement years. It makes multi asset an ideal retirement planning tool which would not only beat inflation but also offer an optimal post tax return with a balanced risk.