Multi Asset Allocation funds are hybrid mutual fund schemes which invest in 3 or more asset classes. According to SEBI, multi asset allocation funds must invest minimum 10% each in at least 3 asset classes. Apart from the two most popular asset classes, equity and fixed income or debt, multi asset allocation funds must invest in other asset classes like gold, real estate investment trusts (REITs), infrastructure investment trusts (InvITs) etc. The fund manager decides the proportional allocation to each asset class based on the market conditions with the objective of balancing risks and returns.
Role of different asset classes in you asset allocation
Winners rotate across asset classes
Notes: Equity is represented by Nifty 50 TRI, Debt by Nifty 10 year Benchmark G-Sec, Gold by MCX Gold Prices and International by S&P 500 in INR.
Top Performing Multi Asset Funds have outperformed Nifty 50 TRI in the last 5 years
We have compared performance of top performing multi asset funds with Nifty 50 TRI over the last 5 years since SEBI introduced this product category. Top performing Multi Asset Allocation funds were able to outperform Nifty by a significant margin during this period despite much lower risks.
The table below shows the biggest drawdowns in the last 5 years or so, ever since the multi asset category came into being. You can see that top performing multi asset funds had much smaller drawdowns compared to Nifty.
This shows that multi asset funds can deliver superior risk adjusted returns for investors.