NFO Insight: Can JM Multi Asset Allocation Fund help investors navigate uncertain market?

JM Financial Mutual Fund has launched the JM Multi Asset Allocation Fund which is open for subscription and will close on July 8.

The investment objective of the fund is to provide long term capital appreciation and generate income by investing in instruments across multiple asset classes viz. Equity, Debt, Gold/silver related instruments and other exchange traded commodity derivatives.

Investment strategy

The scheme aims to achieve growth with a structured approach to multi-asset investing across market cycles. The fund aims to provide investors with a diversified portfolio through a single investment solution.

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The scheme follows a model-guided investment approach supported by a structured Asset Allocation Framework (based on internal computations) that seeks to identify changing growth and inflation environments and guide asset allocation opportunities across asset classes.

By dynamically allocating across asset classes and employing rule-based rebalancing, the scheme seeks to capture opportunities across different market environments while aiming to deliver optimal risk-adjusted growth over the medium to long term.

What CIO - Equity and fund manager say

Satish Ramanathan, Chief Investment Officer – Equity : We are excited to launch the JM Multi Asset Allocation Fund, which adopts a structured, actively managed approach to investing across equity, debt, and commodities. In an environment where investors must navigate evolving market and economic conditions, the Scheme combines a disciplined asset allocation framework with active security selection and a macroeconomic regime-based approach to build more resilient portfolios across market cycles. Investors who are seeking a balanced approach to growth and risk management through a professionally managed multi-asset portfolio may consider this scheme.

Asit Bhandarkar, Senior Fund Manager – Equity: India's long-term growth opportunity remains compelling. The Scheme’s equity allocation will be supported by our proprietary GeeQ (Growth of Earnings and Earnings Quality) framework, which focuses on identifying quality businesses with sustainable growth potential. Together with the scheme's asset allocation framework, we aim to build a diversified portfolio that can participate in opportunities across market cycles

What experts say about the fund

Experts typically ask investors to avoid investing in NFOs unless they offer something unique. The uniqueness could be that the scheme is offering an investment option that is not available in the market or offering something extra to an existing option. Otherwise, the experts believe investors are better off with an existing scheme with a long performance record. This is because you have some historical data to base your investment decision. You don’t have any data when it comes to new offerings.

Expert Shivam Pathak, CFP and Founder of Asset Elixir, told ETMutualFunds that asset allocation in multi asset funds is typically driven by valuations, macroeconomic trends, interest rates, and market conditions. The flexibility to move between equity, debt, and commodities can help the fund participate in growth while reducing downside risk during volatile market phases.

Shruti Jain, Chief Strategy Officer, Arihant Capital Markets shared with ETMutualFunds that by investing across different asset classes, this fund is inherently designed to offer stable returns and protect from market downturns, equity drives growth in bull phases; gold and debt cushion drawdowns in bear phases and since these asset classes are imperfectly correlated, and in stress periods like 2020 or 2022, often negatively so, the portfolio is structurally designed to dampen volatility.

Jain further said that as for the factors that will guide the allocation decision, which means how much money will be invested in each asset class – valuation will play an important role and the fund will utilize an internal proprietary model to monitor markets and decide the asset allocation mix and this model provides broad guidance on relative valuation levels and the scope of asset allocation opportunities.

Of course, macro economic trends play a big role in any investment decision. The fund aims to use the growth–inflation framework that embeds macro indicators, GDP trajectory, inflation readings, and the prevailing economic cycle phase as the primary drivers of regime classification, Jain said in the end.

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Asset allocation

The fund will allocate 35-80% in equity and equity related instruments including derivatives and REITs, 10-55% in debt securities and money market instruments including mutual funds units, 10-50% in gold/silver related instruments (including ETFs, Sovereign gold deposit schemes) and Exchange Traded Commodity Derivatives (ETCDs) of gold/silver and other commodities as permitted by SEBI from time to time, and 0-10% in units issued by InVITs.

Killol Pandya, Head of Fixed Income, JM Financial MF: A multi asset portfolio brings together the complementary characteristics of different asset classes within a single investment solution. The debt component of the portfolio will focus on managing liquidity, credit and interest-rate opportunities while supporting the overall investment strategy of the scheme.

Are these funds better placed than equity funds?

Jain said one of the smartest ways to build a resilient portfolio is through diversification. A multi-asset allocation fund brings together different asset classes under one umbrella, helping investors navigate market cycles while reducing dependence on any single source of returns and in the current environment, with equity valuations normalising post-correction, gold near all-time highs, and RBI in a rate-easing cycle, multi-asset allocation funds offer a meaningful edge over pure equity funds.

She further said that as an investor, you need to understand how much time and understanding you have, and based on that you can decide whether you want to invest in a multi-asset fund or choose separate funds for each category.

Pathak said that in the current environment of elevated valuations and global uncertainties, multi-asset funds can offer better risk-adjusted returns. However, investors who are comfortable managing their own asset allocation may prefer holding equity, debt, and gold funds separately for greater control.

What are multi asset allocation mutual funds and are they suitable for first time investors?

Multi-asset allocation funds invest across equities, debt and commodities such as gold and silver, offering built-in diversification within a single scheme. For many investors, this structure reduces the need to actively rebalance portfolios during uncertain market phases.

Pathak said that multi-asset funds can be suitable for first-time investors as they provide diversification through a single product. However, investors should clearly understand the fund's equity exposure and overall risk profile before investing.

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Jain said that yes indeed, multi asset funds are a good choice for first time investors to kickstart investing and most new investors make two classic mistakes - chasing returns in bull markets and panic-selling in corrections. A multi-asset fund structurally protects against both.

She further said that the built-in diversification across equity, debt, and commodities like gold and silver means the portfolio never swings as violently as a pure equity fund, making it easier to stay invested through market cycles, which means investors don’t panic during market downturns and stay invested to benefit from compounding.

There are around 11 multi asset allocation funds who have completed three years of existence in the market, of which Quant Multi Asset Allocation Fund gave the highest return of around 23.82% in the last five years. HDFC Multi-Asset Allocation Fund gave the lowest return of 12.39% in the same period.

Going forward for multi asset allocation funds

Jain said that in a multi-asset fund, the allocation call, i.e. how much goes into equity, debt, or gold at any given time, determines returns far more than individual stock selection and a wrong macro call can erase good stock picks entirely. Hence the fund manager’s call on asset allocation is very important.

Key metrics to check for these funds are rolling returns for three years, maximum drawdown during corrections, how allocation has changed across asset classes, ratios like sharpe ratio and expense ratio, is what Jain said.

Pathak said that the fund manager's asset allocation decisions play a crucial role in determining long-term returns, investors should track consistency in allocation, downside protection during market corrections, risk-adjusted performance, and the fund's ability to deliver across different market cycles.

The fund will be suitable for investors who are seeking long term wealth creation and want investment in equity and equity related instruments, debt & money market securities, gold/silver related instruments and other exchange traded commodity derivatives.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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