According to AMFI data, multi-asset allocation funds received net inflows of ₹4,811 crore during June. Along with arbitrage funds, which attracted ₹5,799 crore, the category accounted for more than 80% of total hybrid fund inflows of ₹12,893 crore during the month.
The trend comes at a time when investors are navigating volatile markets marked by geopolitical tensions and fluctuations across equities, gold and other asset classes, prompting many to seek diversified investment options.
Unlike equity or debt funds that invest predominantly in a single asset class, multi-asset allocation funds spread investments across at least three asset classes.
These typically include equities, debt and commodities such as gold, although some schemes may also invest in instruments such as real estate investment trusts (REITs) and international securities, depending on their investment mandate.
SEBI regulations require multi-asset allocation funds to invest in a minimum of three asset classes, with each accounting for at least 10% of the portfolio. Take the Nippon India Multi Asset Allocation Fund, for example, which has amongst the largest assets under management in the category.
The category also includes schemes from SBI Mutual Fund, Motilal Oswal, Aditya Birla Sun Life and others.
The rationale behind these funds is diversification. Since different asset classes tend to perform differently across market cycles, spreading investments across them can help reduce concentration risk compared with investing in a single asset class. Fund managers also periodically rebalance portfolios based on their investment strategy and market conditions.
The category has delivered competitive returns over the past few years, although performance varies across schemes and market cycles.
According to Value Research data, the Nippon India Multi Asset Allocation Fund has generated an annualised return of 19.92% over the last three years. Other schemes in the category have also posted double-digit returns during the period, including SBI Multi Asset Allocation Fund at 17.50%,
Aditya Birla Sun Life Multi Asset Allocation Fund at 17.40%, and Motilal Oswal Multi Asset Allocation Fund at 13.90%.
While several multi-asset allocation funds have remained in positive territory over the past six months despite volatile markets, experts caution that returns can differ significantly depending on a scheme’s asset allocation strategy and prevailing market conditions.
For investors, these funds offer exposure to multiple asset classes through a single investment vehicle, eliminating the need to separately manage and periodically rebalance investments across equity, debt and commodities.
However, financial planners advise evaluating a scheme’s investment objective, portfolio allocation, historical performance and risk profile before investing, while keeping in mind that past returns are not a guarantee of future performance.
