Best Multi Asset Allocation Funds
About Multi Asset Allocation Mutual Funds
Multi Asset Allocation Funds in India are mutual funds that invest in a mix of asset classes such as equity, debt, gold, etc. These are hybrid funds that are designed to offer investors a diversified investment option alongside the potential to generate moderate returns.
Multi Asset Allocation Funds, also known as balanced funds or asset allocation funds, are managed by professional fund managers who aim to create an optimal mix of assets based on market conditions. These funds typically invest in different asset classes of varying proportions based on the investors’ market outlook and risk profile.
How Do Multi Asset Allocation Funds Work?
Multi Asset Allocation Funds are a versatile investment option designed to diversify across various asset classes, including equity, debt and gold. These funds allocate a minimum of 10% of their assets to each asset category and often include other options like real estate to further enhance diversification.
These funds are favoured for their ability to provide a well-rounded investment portfolio and a strong history of delivering returns with controlled risk. Their attraction lies in their adaptability to different market conditions. Each asset class responds uniquely to economic shifts, and fund managers strategically allocate assets based on prevailing market conditions. For example, equity is geared towards potential wealth generation, gold serves as a hedge against inflation and economic uncertainty, while debt provides stability.
Investing in Multi Asset Allocation Funds allows investors to benefit from the expertise of fund managers who skillfully navigate diverse asset classes to optimise returns, making them a prudent choice for a balanced and potentially rewarding investment approach across varied market scenarios.
Features of Multi Asset Allocation Funds
- Diversification: Multi Asset Allocation Funds offer diversification across various asset classes, which helps to reduce the overall risk of the portfolio.
- Risk vs return: The funds aim to strike a balance between risk and return by investing in a mix of high-risk and low-risk assets as per market conditions. The fund manager’s expertise is crucial in determining the right mix of assets to achieve the desired risk-return profile.
- Flexibility: Multi Asset Allocation Funds provide flexibility in terms of asset allocation. The fund manager can adjust the allocation of assets depending on the market conditions and the investor’s risk appetite.
- Regular income: Some Multi Asset Allocation Funds offer a regular income option, which is suitable for investors who are looking for a steady stream of income.
Advantages of Investing in Multi Asset Allocation Funds
Multi Asset Allocation Funds offer several advantages for investors. Here are some of the key advantages:
- Diversification: Since Multi Asset Allocation Funds invest in a variety of asset classes, it can help reduce portfolio risk and volatility. Diversification can also help improve returns, as losses in one asset class can be offset by gains in another.
- Professional management: As mentioned earlier, Multi Asset Allocation Funds are managed by experienced investment professionals who have access to research, analysis, and market insights. This can help investors make more informed investment decisions and potentially achieve better returns.
- Convenience: Multi Asset Allocation Funds offer a convenient way for investors to gain exposure to multiple asset classes with a single investment. This can save investors time and effort, as they don’t need to research and manage multiple investments.
- Flexibility: Multi Asset Allocation Funds can be tailored to meet different investment objectives and risk profiles. They can also be adjusted over time to reflect changing market conditions and investor needs.
- Cost-effective: Investing in a Multi-Asset allocation fund can be cost-effective, as the fund can take advantage of economies of scale to reduce transaction costs and management fees. This can result in lower expenses for investors compared to investing in individual securities.
Risk Involved in Multi Asset Allocation Funds
Multi Asset Allocation Funds are designed to provide diversification, which can help reduce risk and increase returns. However, like any investment, there are risks involved in Multi Asset Allocation Funds as well. Here are some of the key risks:
- Market risk: Multi Asset Allocation Funds are subject to market risk, which means that their performance can be affected by changes in the overall economy, interest rates, and geopolitical events.
- Asset class risk: Since Multi Asset Allocation Funds invest in a variety of asset classes, they are subject to the risks associated with each asset class. For example, if the stock market performs poorly, the equity portion of the fund’s portfolio may suffer.
- Manager risk: Multi Asset Allocation Funds are managed by a portfolio manager, and their performance is heavily dependent on the manager’s investment decisions. Poor investment decisions can negatively impact the fund’s performance.
- Liquidity risk: Some asset classes, such as real estate and commodities, can be illiquid, which means they cannot be easily bought or sold. This can make it difficult for the fund to quickly adjust its portfolio in response to changing market conditions.
Investors should carefully consider these risks before investing in Multi Asset Allocation Funds. They should also ensure that the fund’s investment objectives and strategies align with their own investment goals and risk tolerance.
Factors To Consider Before Investing in Multi Asset Allocation Funds
Multi-asset funds offer a range of advantages to investors, fostering a sense of security in their investment choices. Nevertheless, there are crucial considerations to bear in mind before venturing into these funds.
- Diverse Portfolio Allocations: It’s important to recognise that the allocation of assets within multi-asset funds can vary significantly among different mutual fund companies. Therefore, conducting thorough research is imperative to identify a fund that aligns with your specific risk and reward preferences.
- Multiple Goals, Differing Time Horizons: When an individual employs a multi-asset allocation fund to pursue various financial objectives, particularly with varying timeframes, it can become challenging to meet these goals effectively. Multi-asset funds tend to perform optimally over extended periods, so they may not be the ideal choice for short-term objectives.
- Broad Applicability: Multi-allocation funds can be a valuable addition to the mutual fund portfolio of a diverse range of investors, as highlighted earlier.
Who Should Invest in Multi Asset Allocation Funds?
Multi Asset Allocation Funds are suitable for investors who want to diversify their portfolios by investing in stocks, bonds, and other securities. Here are some examples of investors who may benefit from investing in these funds:
- Beginners: Multi Asset Allocation Funds are ideal for beginner investors who may not have the expertise or knowledge to create a diversified portfolio of their own. These funds provide exposure to different asset classes, which can help mitigate risk and provide stable returns.
- Investors with low-risk tolerance: Investors who are risk-averse or have a low-risk tolerance may benefit from Multi Asset Allocation Funds. These funds help minimise volatility and provide more stable returns than investing in individual stocks.
- Retirement investors: Multi Asset Allocation Funds can be a good option for retired investors with moderate risk tolerance, who want to generate income and growth from their investments while minimising risk. These funds can provide a consistent income stream while also providing long-term growth potential.
- Busy investors: Investors who do not have the time or resources to manage their own portfolios may benefit from Multi Asset Allocation Funds. These funds are managed by professional fund managers who make investment decisions on behalf of the investors.
Investors should carefully review the fund’s prospectus and consider their investment objectives, risk tolerance, and financial situation before investing in any fund.
Taxability of Multi Asset Allocation Funds
The taxation of multi-asset allocation funds is not strictly determined by the percentage of assets retained in debt or equity, as there is no requirement for these funds to maintain a certain allocation. As a result, the tax implications of these funds can vary depending on the specific scheme.
Although equity funds are generally favoured by tax-conscious investors, it is important to thoroughly review the relevant scheme-related documents to gain a clear understanding of how the fund manager intends to allocate equity within the portfolio.
If an investor holds the units of a Multi-Asset allocation fund for more than 3 years, any gains from the sale of those units will be considered long-term capital gains and will be subject to long-term capital gains tax. The long-term capital gains tax rate for Multi Asset Allocation Funds is 10% (plus applicable surcharges) without indexation or 20% (plus applicable surcharges) with indexation, whichever is lower.
Dividend taxation – Dividends earned on multi-asset allocation funds are added to the investor’s taxable income and taxed at the rate as per the income tax slab. There is also a 10% TDS on a dividend amount exceeding ₹5,000 in a financial year.
How To Invest in Multi Asset Allocation Funds?
Investing in Multi Asset Allocation Funds via your Angel One account is a hassle-free process. Simply follow these guidelines:
Step 1: Commence by logging in to your Angel One account using your registered mobile number. Validate the OTP and input your MPIN.
Important: If you don’t have a Demat account with Angel One, it’s swift and straightforward to open one. This entails fulfilling the KYC requirements and providing the requisite documentation.
Step 2: Next, select the most suitable fund based on your financial requirements and risk appetite. You can evaluate each fund within the mutual fund section of the Angel One app. Consider these aspects during this phase:
- Identify the specific fund you intend to invest in.
- Examine the fund’s historical performance, tax implications, constituent sectors, and underlying stocks.
- Utilise the provided calculator to estimate potential returns.
- Assess the fund’s risk level and check if it aligns with your risk tolerance.
- Take into account the fund’s ratings, typically on a scale of 1 to 5, awarded by reputable rating agencies.
- Gauge the fund’s expense ratio to understand the associated investment costs.
Step 3: Once you’ve finalised your fund selection(s), navigate to the Mutual Funds section, and locate your chosen fund(s). Given that this could be a long-term investment, exercise prudence during this stage. Consider these factors:
- Decide whether you prefer a lump-sum investment or opt for a monthly SIP (Systematic Investment Plan).
- Specify your desired investment amount and choose your preferred payment method, with UPI being the recommended choice, though net banking is also an option.
- For SIP investments, you can establish a mandate for effortless future contributions after placing your order.
Top 5 Multi Asset Allocation Funds to Invest in
The following are the top Multi-Asset Funds in India:
| Name of the Fund | AUM (₹ Cr) | CAGR 5Y | Expense Ratio | Sharpe Ratio | CAGR 3Y |
| Quant Multi Asset Fund | 3201.26 | 27.47 | 0.61 | 0.80 | 19.47 |
| ICICI Pru Multi-Asset Fund | 51027.46 | 21.07 | 0.72 | 1.44 | 18.66 |
| UTI Multi Asset Allocation Fund | 4962.80 | 15.61 | 0.42 | 1.20 | 18.24 |
| HDFC Multi-Asset Fund | 3843.90 | 15.43 | 0.79 | 1.09 | 13.45 |
| SBI Multi Asset Allocation Fund | 6983.14 | 14.18 | 0.54 | 0.89 | 14.99 |
The above-mentioned top mid-cap funds are for informational purposes only and are not recommendations. The funds are ranked based on 5-year CAGR as of January 2025.
Quant Multi Asset Fund
The Quant Multi Asset Fund ranks 1st based on its 5-year CAGR of 27.47%. It has an AUM of ₹3,201.26 crore and an expense ratio of 0.61%.
The fund’s Sharpe ratio is 0.80, which is the 2nd lowest in the list. Over the past 3 years, it has delivered a CAGR of 19.47%, the highest among the 5 funds.
ICICI Pru Multi-Asset Fund
The ICICI Pru Multi-Asset Fund ranks 2nd with a 5-year CAGR of 21.07%. It has the highest AUM among the 5 funds, at ₹51,027.46 crore, and an expense ratio of 0.72%, which is the 2nd highest on the list.
The fund’s Sharpe ratio of 1.44 is the highest, indicating strong risk-adjusted returns. Over the past 3 years, it has delivered a CAGR of 18.66%, ranking 2nd in 3-year performance.
UTI Multi Asset Allocation Fund
The UTI Multi Asset Allocation Fund ranks 3rd with a 5-year CAGR of 15.61%. It has an AUM of ₹4,962.80 crore and an expense ratio of 0.42%, which is the lowest among the 5 funds.
The fund’s Sharpe ratio of 1.20 is the 2nd highest. Over the past 3 years, it has delivered a CAGR of 18.24%, ranking 3rd in 3-year performance.
HDFC Multi-Asset Fund
The HDFC Multi-Asset Fund ranks 4th with a 5-year CAGR of 15.43%. It has an AUM of ₹3,843.90 crore and an expense ratio of 0.79%, which is the highest in the list.
The fund’s Sharpe ratio of 1.09 ranks 3rd, and over the past 3 years, it has delivered a CAGR of 13.45%, the lowest in the list.
SBI Multi Asset Allocation Fund
The SBI Multi Asset Allocation Fund ranks 5th with a 5-year CAGR of 14.18%. It has an AUM of ₹6,983.14 crore and an expense ratio of 0.54%.
The fund’s Sharpe ratio of 0.89 is the lowest in the list. Over the past 3 years, it has delivered a CAGR of 14.99%, ranking 4th in 3-year performance.
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Multi Asset Allocation FAQs
What are Multi Asset Allocation Funds?
What are the benefits of investing in Multi Asset Allocation Funds?
How do Multi Asset Allocation Funds differ from balanced funds?
What are the risks associated with investing in Multi Asset Allocation Funds?
How should I evaluate Multi Asset Allocation Funds before investing?
