Multi-asset mutual funds: Why consistency matters across investment periods

Investors comparing multi-asset mutual funds may need to look beyond the scheme topping the performance chart over a particular period. Category data show that fund rankings can change significantly across investment horizons, making consistency across multiple periods an important factor to examine.

Data from Icraonline, dated November 8, show that WhiteOak Capital Multi Asset Allocation Fund, Mahindra Manulife Multi Asset Allocation Fund, Mirae Asset Multi Asset Allocation Fund and DSP Multi Asset Allocation Fund have featured among the relatively consistent performers across different time horizons, although their performance patterns and track records vary.

WhiteOak Capital Multi Asset Allocation Fund has maintained a first-quartile ranking across six months, nine months, one year and two years. Its returns stood at 4.03% over six months, 4.81% over nine months, 9.27% over one year and 13.13% over two years.

Mahindra Manulife Multi Asset Allocation Fund also featured in the first quartile across six months, nine months and two years. It delivered an annualised return of 13.12% over two years, against the category average of 9.73%, ranking third in the category. Its one-year return was 8.89%, placing it in the second quartile.

Mahindra Manulife Mutual Fund, one of the newer players in the mutual fund industry, follows an active management approach, with an emphasis on adhering to its investment mandates. Its Multi Asset Allocation Fund invests across equity, debt and commodities, based on the premise that market leadership shifts over time and no single asset class consistently outperforms across market cycles.

Mirae Asset Multi Asset Allocation Fund recorded returns of 2.64% over six months, 2.90% over nine months and 11.85% annualised over two years, securing first-quartile rankings across these periods. Its one-year return of 8.97% placed it in the second quartile.

DSP Multi Asset Allocation Fund, meanwhile, stands out over longer investment horizons, with first-quartile rankings across one-year, two-year and three-year periods, according to the category data.

Why looking at multiple time horizons matters

The difference in fund rankings across investment periods highlights why investors should avoid selecting a scheme solely on the basis of its latest performance.

For instance, Quant Multi Asset Allocation Fund topped the one-year performance table with a return of 11.36%. DSP Multi Asset Allocation Fund led the two-year table with an annualised return of 13.41%, while Quant Multi Asset Allocation Fund again topped the three-year category with a return of 21.25%.

This variation shows that a fund leading over one period may not necessarily maintain the same position over a longer or shorter horizon.

Multi-asset allocation funds invest across asset classes such as equity, debt and commodities. The objective is to diversify the portfolio and reduce dependence on the performance of any single asset class. Since different asset classes can perform differently across market cycles, their relative contribution to a fund’s returns can also change.

Consequently, evaluating performance across multiple periods can offer a broader picture of how a scheme has navigated different market conditions than looking at a single return figure.

However, quartile rankings are relative to other schemes in the category and do not indicate guaranteed future performance. Investors should also examine a fund’s investment strategy, asset allocation, risk profile, expenses and performance over an appropriate period before making an investment decision.