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Investing can be a daunting endeavour, with countless choices that often leave investors perplexed. It’s no surprise that multi-asset funds are gaining significant attention in the Indian investment landscape. These funds are designed to simplify the investment process while offering a well-diversified portfolio to suit various risk profiles. In this blog, we will delve into the world of multi-asset funds, understanding their core concepts, the types of assets they encompass, the advantages they bring to investors, and the strategies used by fund managers to optimize returns.
One of the key factors that make multi-asset funds attractive is the strategies employed by fund managers to optimize asset allocation. Fund managers use various strategies to create a diversified portfolio and adapt to changing market dynamics.
Active vs. Passive Management: Multi-asset funds can be actively managed, where the fund manager actively makes decisions on asset allocation, or passively managed, where the fund follows a preset allocation based on a fixed index. Active management offers flexibility and aims to outperform the market, while passive management tends to have lower costs.
Dynamic Asset Allocation: Some multi-asset funds employ a dynamic asset allocation strategy. Here, the fund manager adjusts the allocation based on market conditions, economic outlook, and the fund’s investment objectives. This active approach can help capture opportunities and manage risks effectively.
Tactical Asset Allocation: Fund managers may also use tactical asset allocation strategies. This involves making short-term shifts in the portfolio to capitalize on perceived market inefficiencies or to adjust to changing market conditions.
| Scheme Name | AuM (Cr) | 1W | 1M | 3M | 6M | YTD | 1Y | 2Y | 3Y | 5Y | 10Y |
| Quant Multi Asset Fund | 1,019.75 | -1% | 0% | 0% | 8% | 8% | 11% | 13% | 28% | 23% | 14% |
| Motilal Oswal Multi Asset Fund | 114.21 | -1% | -1% | 4% | 11% | 13% | 14% | 7% | 8% | – | – |
| HDFC Multi-Asset Fund | 1,954.41 | -1% | -1% | 0% | 7% | 10% | 12% | 8% | 16% | 14% | 12% |
| UTI Multi Asset Allocation Fund | 880.78 | -1% | 0% | 3% | 12% | 15% | 18% | 10% | 14% | 11% | 10% |
| SBI Multi Asset Allocation Fund | 1,911.03 | -1% | -1% | 3% | 11% | 14% | 16% | 10% | 14% | 13% | 11% |
| ICICI Prudential Multi-Asset Fund | 24,060.99 | -2% | -1% | 2% | 12% | 14% | 18% | 14% | 29% | 18% | 17% |
| Axis Multi Asset Allocation Fund | 1,319.64 | -2% | -2% | -2% | 6% | 5% | 6% | 0% | 13% | 14% | 10% |
| Nippon India Multi Asset Fund | 1,537.72 | -2% | -2% | -1% | 8% | 10% | 13% | 6% | 14% | – | – |
| Tata Multi Asset Opp Fund | 1,852.12 | -2% | -2% | 0% | 9% | 9% | 11% | 8% | 18% | – | – |
| 1Y | 2Y | 3Y | 5Y | 10Y | |
| Average Return | 13.1% | 8.4% | 17.0% | 15.4% | 12.4% |
| Standard Deviation / Volatility | 3.8% | 4.1% | 7.0% | 4.2% | 2.7% |
Performance of a multi-asset portfolio (50% equity + 25% debt + 25% gold) compared to the Nifty 50 TRI during the financial crisis of 2008 and the COVID-19 crisis of 2020.
Source: DSP MF
If we check the performance of ICICI Prudential Multi-Asset Fund in the last one year it has given return of 18% and in the last 10-years its delivered handsome returns of 17% annualized. Now, here comes an interesting insight portfolio turnover ratio is 32% as compared to category average turnover ratio of 121.75% this means fund manager updated portfolio less frequently than peers in last 1 year.
The multi-asset portfolio outperformed the Nifty 50 TRI in both crises. During the financial crisis, the multi-asset portfolio declined by 27% while the Nifty 50 TRI declined by 59%. During the COVID-19 crisis, the multi-asset portfolio declined by 18% while the Nifty 50 TRI declined by 38%.
This suggests that a multi-asset portfolio can help to reduce downside risk during market downturns. By diversifying across different asset classes, investors can reduce their overall exposure to any one asset class and thus reduce their overall risk.
It is important to note that past performance is not indicative of future results. Market downturns can be unpredictable and severe. However, a multi-asset portfolio can be a helpful tool for managing risk and reducing drawdowns during market turmoil.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
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