NFO Insight: Can this multi asset allocation fund help diversify your portfolio?

Economic Times

7 days ago

ETMarkets.com 360 One Mutual Fund introduces its Multi Asset Allocation Fund. Subscription is open until August 13.
360 One Mutual Fund's latest new fund offer of 360 One Multi Asset Allocation Fund is open for subscription and will close on August 13. The fund is an open-ended scheme that invests in a diversified portfolio of equities, debt, commodities, and assets such as REITs and InvITs.
According to the fund house, this multi asset allocation fund addresses the need for portfolio diversification amid increasing geopolitical instability, currency fluctuations, and global economic challenges and by investing across asset classes with varying correlations, the fund aims to deliver a smoother investment journey and counterbalance market volatility.
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The fund is benchmarked against a composite index of BSE 500 TRI (25%), NIFTY Composite Debt Index (45%), and domestic gold and silver prices (30%). The fund is managed by Mayur Patel, Milan Mody, and Rahul Khetawat.The minimum investment amount during the NFO is Rs 1,000 and in multiples of Re 1 thereafter. For SIP investments, the minimum application amount is Rs 1,000 and in multiples of Re 1 thereafter. The fund has an exit load structure of 1% if units beyond 10% are redeemed within one year from allotment, while no exit load is applicable for units redeemed after one year from allotment.
"The 360 ONE Multi Asset Allocation Fund embodies our commitment to providing innovative solutions tailored to investors' evolving needs. By diversifying across asset classes, we aim to mitigate risk and create sustainable value for our clients in an ever-changing global environment,' said Raghav Iyengar, CEO of 360 ONE Asset Mutual Fund.'With this fund, we are not only expanding our robust portfolio of investment products but also empowering investors to navigate market complexities with confidence. This is another step in our journey to redefine the investment landscape in India," Iyengar added.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.An expert is of the opinion that one should avoid investing in NFOs as no track record is available and we should consider only if we are convinced that the fund fulfills the purpose of your investing.'An NFO does not have a track record, so investment should be considered only if we are convinced with the philosophy of the fund manager and if the taxation rules are also in line with our expectations,' Rajesh Minocha, a Certified Financial Planner (CFP), Founder of Financial Radiance shared with ETMutualFunds.
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Sharing a similar opinion another expert also mentioned that NFOs are generally best avoided and unlike IPOs, NFOs offer no price advantage.'NFOs are generally best avoided, as they lack a performance track record and the fund manager's strategy is often unclear. Unlike IPOs, NFOs offer no price advantage. Given the wide range of funds available from diversified categories with historical track record, investors are better off choosing from existing options,' Chethan Shenoy, Executive Director & Head - Product & Research at Anand Rathi Wealth Limited told ETMutualFunds.The fund follows a dynamic asset allocation framework with investments across multiple asset classes, including 15% to 35% in equities to target long-term growth, 25% to 50% in debt instruments for relative stability, 25% to 40% in gold and silver as a hedge against global uncertainties, and 0-10% in in REITs and InvITs to provide exposure to real estate.The fund is suitable for investors seeking to create wealth and income in the long term and who want investment in multiple asset classes.Multi-asset allocation funds are hybrid funds that need to invest a minimum of 10% in at least 3 asset classes. These funds typically have a combination of equity, debt, and gold. Some schemes also add international equities, InvITs and REITs.The equity allocation in the case of multi-asset funds could vary between 0-70%. Aggressive multi-asset funds could typically have 50-65% equity while the conservative ones could have between 35-50%. In the case of multi-asset funds, some schemes that allocate more than 65% to equity enjoy equity taxation.Minocha, while mentioning that the multi asset allocation funds are suitable for moderate risk investors, he adds that these funds offer better downside protection especially when the markets get a bit volatile. 'Through diversification across asset classes, these funds lower the volatility of the portfolio. Gold and debt provide a cushion when the equity markets correct, thus the downside protection offered is more than what an equity fund can do. However, in the past, there have been unusual activities like equity and gold going up at the same time that has provided extra-ordinary returns to investors, sometimes even better than equity. Investors should set their expectations realistically,' he added.
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On the other hand, Shenoy shares a different opinion. According to him though these funds aim to balance risk and return by spreading investments across different asset classes however, the diversification offered is not ideal as the investor has no control over how much is allocated to each asset and cannot adjust exposure based on personal goals or risk appetite. 'These funds follow preset allocations, limiting their ability to protect against losses during market corrections. True downside protection requires dynamic rebalancing, which is better achieved by managing equity and debt exposure separately. Relying on a static fund structure offers limited flexibility and minimal protection in volatile phases,' Shenoy commented.According to the Sebi mandate, multi asset allocation funds invest in at least three asset classes with a minimum allocation of at least 10% each in all three asset classes. For investors willing to invest separately in equity, debt, and gold funds against multi-asset allocation funds, Shenoy believes that compared to building a portfolio with pure-play equity, debt, and gold funds, multi-asset allocation funds give investors less control and adaptability and when you invest individually, you can adjust your exposure to each asset class as per your financial goals and risk appetite.He further said that multi-asset funds, by contrast, lock you into the manager's allocation, which can lead to missed opportunities and redundancy if you already have a defined asset mix and they also limit visibility into the portfolio's market capitalization exposure, which even adding two or more multi-asset funds won't resolve. 'In most cases, investors are better off avoiding these and directly managing their equity and debt allocations,' he added.On the contrary, Minocha has different points of view where he believes that multi asset funds provide an easy and hassle-free way of rebalance that investors may find hard to do on their own and separate investments allow more control and can possibly work out to be cheaper, while requiring constant monitoring and discipline.
Around 23 multi asset funds have marked their presence in the market in the last one year of which WOC Multi Asset Allocation Fund has offered the highest return of 15.23%, followed by DSP Multi Asset Allocation Fund which offered a return of 12.39% in the last one year. ICICI Pru Multi-Asset Fund, the largest multi asset allocation fund, delivered a return of 8.50% in the said time period. HSBC Multi Asset Allocation Fund was the last one to offer a positive return of around 2.16%. And lastly, only Shriram Multi Asset Allocation Fund gave a negative return in the last one year of around 6.33%.
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Post witnessing the recent performance, Minocha mentioned that the outlook of multi asset funds is very positive. 'In uncertain markets, diversified strategies contingent to smooth returns are a blessing for long-term investors looking for the limelight on both growth and stability. They serve well for people who don't like to get their hands dirty and need consistent and ordinary returns beating the inflation and providing them additional alpha over traditional products like fixed deposits,' he added.Continuing with a different opinion, Shenoy said if investors are already defining their asset mix at the overall portfolio level, adding a multi-asset allocation fund could lead to redundancy or concentration, especially if the fund is skewed toward equity.'Hence, investors should consider avoiding multi-asset allocation funds and instead opt for individual exposure to equity and debt which allows for the ideal strategy for better returns, long term growth and wealth creation,' he adds.One should always invest based on their risk appetite, investment horizon, and goals.
(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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