Multi asset mutual funds beat other hybrid funds in 1 & 3 years. Should they be in your portfolio?

Time of India

6 days ago

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What are multi-asset allocation funds?
Multi asset allocation mutual funds have topped the return chart among all hybrid funds in the last one and three years, an analysis of the performance by all hybrid funds showed. The market experts believe that the combination of asset classes has helped manage risk while delivering solid returns, especially in the current market cycle.'It's evident that the strong performance has been driven not just by gold , but also by the rally in silver and overall favourable conditions for debt and equity. The combination of asset classes has helped manage risk while delivering solid returns, especially in the current market cycle,' Shruti Jain, Chief Strategy Officer, Arihant Capital Markets shared with ETMutualFunds.Also Read | NFO Insight: Can this multi asset allocation fund help diversify your portfolio? There were around 23 multi asset funds in the last one year and only eight have marked their presence in the market in the last three years. In the last one year and three years, multi asset funds gave an average return of 8.12% and 16.46% respectively.WOC Multi Asset Allocation Fund offered the highest return of around 16.89% in the last one year, followed by DSP Multi Asset Allocation Fund which gave 13.09% return in the same period. Shriram Multi Asset Allocation Fund was the only fund in the category which gave a negative return of around 3.14%. Quant Multi Asset Allocation Fund offered the highest return in the last three years of around 20.48%, followed by ICICI Pru Multi-Asset Fund which gave 19.15% return in the same period. Axis Multi Asset Allocation Fund offered the lowest return of 10.70% in the same period.Looking at the historical performance and with these funds topping the return chart, Jain believes that the outlook for multi-asset funds remains positive. 'As markets navigate consolidation and global macro shifts, the diversified structure of these funds could help cushion volatility and capitalise on opportunities across asset classes. They present a stable investment route in times of economic uncertainty,' she added.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.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. They aim to deliver ease from the volatility linked to plain vanilla equity funds.According to a report by ETMarkets, Gold and silver extended their gains amid safe-haven buying due to U.S. trade tariff uncertainty and weakness in the U.S. equity markets. The U.S. President again threatened India for imposing higher trade tariffs for importing Russian oil and supported safe-haven buying for precious metals. The U.S. equity markets plunged amid mixed U.S. economic data and the dollar index was also off day highs, supporting gold and silver prices.With gold and silver rallying and offering good returns, many investors are willing to invest separately in equity, debt, and gold funds against multi-asset allocation funds, to which Jain replies that as the market is in consolidation phase multi-asset or hybrid funds offer a balanced exposure across asset classes.'With silver and gold continuing to perform well and the rate cut cycle potentially favouring debt, multi-asset funds can be a compelling option right now for investors looking for diversification without actively managing allocations themselves,' Jain recommends.According to another report by ETMarkets, Zerodha Fund House, which has just launched a new Multi Asset Passive FoF (fund of funds), comes with 25% allocation to gold ETF and 15% to G-Sec ETFs. The remaining 60% is divided equally between largecap and midcap ETFs.If investors were to invest separately in gold, equity, and debt and rebalance the portfolio every year, the resulting tax outgo could be significantly higher, denting overall post-tax returns. Multi-Asset Allocation funds, as a product category, are taxed on the basis of the equity allocation, according to a report by ETBureau.Assets under management in multi asset funds rose 51% over the past year — from Rs 86,000 crore in June 2024 to Rs 1.3 lakh crore in June 2025. Fund managers also point to the tax efficiency of these products as a key draw for wealthy investors.One should always invest based on their risk appetite, investment horizon, and goals.: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on [e-mail] alongwith your age, risk profile, and Twitter handle.