Different mutual funds feature different investment strategies. Moreover, the risk factors and returns they provide depend on the market condition and the asset classes they invest in. If you are looking for funds that offer low-risk capital appreciation, investing in a multi-asset allocation fund can be a perfect choice.
Continue reading to know how!
Multi-asset Allocation Fund: What is It?
As the name suggests, a multi-asset allocation fund invests in multiple securities like gold, debt, equity, etc. Fund managers assess the market condition and allocate these funds in various asset classes dynamically. Investing in these funds helps diversify your portfolio and earn risk-adjusted returns.
You don't depend on a single asset class for returns as these funds are being invested in multiple securities. So, there are better opportunities to generate returns during a volatile market condition. However, considering the diverse investment ventures, it is not easy to manage these funds. As per SEBI, you need to invest these funds in a minimum of three asset groups. The minimum allocation should be 10% in each asset class.
Managing investment in three different asset classes with a minimum 10% limit can be troublesome for individuals. So, you should better allocate the assets through an AMC for expert allocation.
What Are the Advantages of a Multi-asset Allocation Fund?
Multi-asset allocation funds come with ample benefits for investors. Here are some of the notable advantages you must know:
Unrestricted Entry and Exit
You do not need to pay any amount to enter or exit this scheme. However, the free exit scheme has a condition. You need to redeem at least 10% of your investment before one year and the remaining within a year. Any difference in the redeeming percentage or tenure can attract an exit load of 1% on your returns. However, if you trade the investment after completing a year, no exit load is levied on your funds.
Diversification
With a multi-asset allocation mutual fund, your investment portfolio can receive exposure to multiple asset classes. Moreover, being diversified, these funds assure you steady returns with low risk-reward factors despite volatile market cycles.
Rebalancing Portfolio
Considering the fluctuations in the market scenario portfolio rebalancing and asset reallocation are much needed to cope with the ups and downs. As these funds feature investing in various asset classes, it is essential to distribute the investments in well-performing asset classes for maximum benefits.
This is known as a rebalancing portfolio. These funds feature an automatic portfolio rebalancing option for a seamless investment procedure.
Readymade Portfolio
Creating a customised investment portfolio by an expert is pricey but every investor wants to have one. Investing in a multi-asset allocation fund can fulfil your desire for a tailor-made investment portfolio. So, these funds are not only a risk and reward-balanced investment option but also benefit you with different asset class features by investing in a single fund type. Consequently, you get a readymade portfolio without any hurdles.
Things to Consider Before You Invest in Multi-asset Allocation Funds
Check out the following factors that you must consider before investing in a multi-asset allocation fund:
Quantitative Parameters:
You should always assess the risk profile, check the investment horizon, and analyse your investment objective before investing in these funds. Moreover, you should select the scheme in which you want to invest wisely. You can choose between debt and equity-oriented funds after assessing their risk, return, and other parameters.
After all these, you need to check the fund’s consistency while performing in bullish and bearish market conditions. Generally, a bullish market is a favourable ground for all funds’ performance. So, you need to look for the ability of a multi-asset allocation fund to get through the bearish market risks and its skills in asset allocation across gold, equity, debt, etc.
Another major factor that you must consider is its risk-reward parameters. You should always choose a fund that has a strong risk-reward profile. So, you need to check if the chosen fund has rewarded investors with Sortino Ratio, Standard Deviation, or Sharpe Ratio for the risks they have taken.
Qualitative Parameters:
Qualitative parameters are equally essential as quantitative ones when you decide to invest in a multi-asset allocation fund. These parameters help determine the fund manager's efficiency and portfolio quality. As an individual investor, you cannot manage the funds and determine the proper asset class to invest in them for better returns. So, you need a fund manager to get your job done.
However, relying on any fund house will not be a wise decision. So, you need to assess the fund house's performance record before choosing one. Moreover, fund managers are the persons who directly deal with your asset. So, you need to check the qualification, experience, ability, and management skills of the fund manager beforehand.
Next, you should check the fund's portfolio in which you intend to invest in. You need to assess its diversification across different asset classes and the securities in them. If you invest in a concentrated portfolio without investigating its performance, it can be highly risky for you.
For instance, if a multi-asset fund features an equity-oriented portfolio that allocates assets into stocks in the small-cap and mid-cap segment, it can involve a high-risk factor. So, you need to select an appropriate scheme to keep your risk profile aligned.
On the other hand, if the fund feature a debt portfolio, do not miss checking its underlying securities' credit profile. A well-performing fund allocates top-quality papers to lower the credit risk and maintains a rebalanced portfolio as per the interest rate outlook.
Last but not least, make sure the chosen fund has a diverse profile in gold or asset classes as per the economic outlook.
Top Multi-asset Allocation Funds in India
| Mutual fund | 5 Yr. Returns | 3 Yr. Returns |
| Quant Multi Asset Fund Growth | 27.79% | 33.03%
|
| ICICI Prudential Multi-Asset Fund | 19.64%
| 25.32%
|
| HDFC Multi-Asset Fund | 14.06%
| 15.25%
|
| Axis Triple Advantage Fund | 11.97%
| 10.31%
|
| HDFC Dynamic PE Ratio Fund of Funds Scheme
| 13.75%
| 16.07%
|
| Aditya Birla Sun Life Financial Planning FOF Aggressive Plan | 13.53%
| 14.59%
|
| SBI Multi Asset Allocation Fund | 11.45%
| 11.56%
|
| UTI Multi Asset Fund | 9.58%
| 10.74%
|
| Aditya Birla Sun Life Financial Planning FOF Conservative Plan | 9.13%
| 9.05%
|
| Axis Retirement Savings Fund - Dynamic Plan | 7.03%
| 8.08%
|
Note: Data as per 10th January 2023
Bottom Line
You can earn multi-asset fund dividends at a much lower risk than pure equity funds. First-time investors or new investors can consider investing in multi-asset allocation funds for assured return at minimum risks. Moreover, these funds will help rebalance your portfolio as per the changes in market conditions in a seamless manner.