Multi Asset Allocation

What are Multi-Asset Allocation Funds?

Multi-Asset Allocation Mutual Funds are balanced funds that invest at least 10% of their portfolio in three or more asset classes as per the SEBI guidelines. The fund can invest in a diverse range of assets and securities in the equity and debt market, including gold, real estate, commodities, bonds, stocks, gold, international equities, etc. This wide range of investment options provides investors the benefit of exposure to a diversified portfolio and a lower risk from volatility in any asset class.

The distribution and allocation of assets in a Multi-Asset Fund can vary, and it is up to the fund manager how the allocation and investment are to be planned. As per SEBI guidelines, the Multi-Asset Allocation Fund has to have at least 10% of its portfolio in three or more asset classes, while there are no restrictions on which assets or allocations the fund manager has to follow. These funds follow the principles of ‘Do not put all your eggs in one basket,’ allowing investors to enter multiple asset classes and get performance benefits at different times.

Multi-Asset Funds allow the fund managers to play an instrumental role since they get higher flexibility to allocate funds as per market conditions and their analysis. For instance, if the stock market is volatile, the fund manager can give a higher allocation towards debt, gold, or safer instruments to ensure no adverse effects on the fund's returns. Meanwhile, when the market is experiencing a bull run, the fund manager can increase exposure to equity-linked schemes and make the best of both situations. 

Who Should Invest in Multi-Asset Allocation Funds?

Investing in a Multi-Asset Allocation Mutual Fund is ideal for investors who do not want a higher risk and want to earn stable returns by diversifying their investment in multiple financial instruments. Also, the fund is excellent for long-term holding or a long investment horizon, i.e., above five years at least. 

Depending on the risk and the investment goal, investors can choose a Multi-Asset fund that is heavily focused on debt and equity. An equity-linked multi-asset scheme is ideal for long-term gains but with a relatively higher risk. For those wanting stable returns, the debt-oriented scheme is the perfect option. 

Features of Multi-Asset Allocation Funds

Some features of Multi Asset Allocation Funds include:

  • Portfolio Diversification: As per SEBI guidelines, Multi-Asset Allocation Funds should invest a minimum of 10% in three or more asset classes. It ensures that the investor gets exposure to different assets by investing in a single scheme, and there are no other regulations to define how this diversification can be done. Thus, investors need to go through the scheme-related documents carefully and plan their investment based on the investment goals declared by the fund. 
  • Fund Manager Role: Although every mutual fund’s performance is directly linked to the crucial role played by the fund manager, in Multi-Asset Funds, their role is vital. The fund manager determines the style and type of investment and enjoys a higher autonomy to make decisions given the diversity in the fund. Thus, investors should check the fund’s track record and manager’s experience when investing. 
  • Fund Returns: Multi-Asset Funds of not promise or guarantee any returns to the investor, and even if the fund is focused on debt investment, the fund is susceptible to market conditions. So investors must plan and invest in these funds by planning their investment accordingly. 

Taxability of Multi-Asset Allocation Funds

Multi-Asset Allocation Funds follow different equity exposure, so the tax incurred on the returns generated by these funds varies. As per the amendments to the 2020 Budget, investors are taxed depending on the type of scheme that they have invested in. Thus, if the equity exposure is more than 65%, the scheme is taxed like any other equity-oriented fund. Meanwhile, if it is lower, it will incur taxes similar to a debt fund.

Fund Type Short Term Capital Gains Tax Long Term Capital Gains Tax
Equity-linked Scheme Holding Period: less than 12 months

Tax Incurred: 15% irrespective of income tax slab

Holding Period: more than 1 year

Tax Incurred: Tax-free up to INR 1 lakh. Anything above INR 1 lakh is taxed at 10%

Debt-linked Scheme Holding Period: less than 36 months

Tax Incurred: Added to your overall income and taxed as per the income slab that you fit in

Holding Period: more than 36 months

Tax Incurred: 20% with indexation

Risk Involved in Multi-Asset Allocation Funds

Since Multi-Asset Allocation Funds can range from equity-oriented to debt-oriented, their risk can also vary. In either case, Multi-Asset Funds have a lower risk appetite since the funds are not concentrated on any particular asset or instrument. This mitigates the risk associated, and the fund can even sustain and give wholesome returns despite the market, volatility, and concentration risks.

The debt fund has a much lower risk threshold, while the equity-focused multi-asset fund can have a higher risk but carries much less risk than any other equity fund. 

Advantages of Multi-Asset Allocation Funds

Some of the major benefits of investing in Multi-Asset Allocation Funds include:

  • Higher Diversification: Since your portfolio can be invested in multiple asset classes, you get the benefit of lower risk and earning steady returns from different market cycles
  • Rebalancing Portfolio: Investors must rebalance their portfolio per market conditions and investment goals. With multi-asset allocation, investors do not have to redistribute or rebalance their portfolio, as it is done by the fund managers and the mutual fund house
  • Tailor-made Portfolio: Multi-Asset Allocation Mutual Funds invest in diverse market instruments and assets based on industry research, market conditions, and constant market monitoring. It enables investors to get a ready-made portfolio that invests in multiple assets and has it well-balanced to ensure optimal returns.
  • Unrestrained entry/exit load: The Multi-Asset Allocation Fund allows investors to enter and exit without any charge to the investor. The investor can even redeem 10% of their investment before a year has passed. No exit load is levied if the fund is sold after a year. Even though the fund has not been through a complete market cycle, these funds have given investors good returns and are ideal for both long-term and short-term holding.   

Who Are These Funds Suited For?

Multi-asset allocation mutual funds are ideal for investors who want to diversify their portfolio and do not want to assume a higher level of risk by investing their funds in a particular asset class. The diversified portfolio of a multi-allocation fund offers capital gains in the long run while minimizing associated risk. 

Additionally, multi-asset allocation funds are ideal for investors who expect a stead flow of income while some asset classes are volatile or underperforming. 

Best Multi-Asset Allocation Funds in India

Now that we have looked at all the aspects of multi-asset allocation funds, here is a look at the top multi-asset allocation funds in India in 2022 that you can think of investing in:

Quant Multi Asset Fund

Quant Multi Asset Fund Growth scheme is a mutual fund that invests primarily in multi-asset allocation focused on high growth. The scheme has given consistent returns to its investors since its launch on 01 January 2013 and has INR 362 Crores AUM as of 30 June 2022. The fund has an expense ratio of 0.56% and currently has allocated 71.10% in equity while 8.34% is allocated to the debt.

The primary holdings of the scheme are in Nippon India ETF Gold BeES, State Bank of India, GOI, Patanjali Foods, and Ambuja Cements. Most of the equity portion invests in financial services, consumer staples, communication, and construction sectors.

  • Minimum Investment: SIP INR 1000 & Lumpsum INR 5000
  • Fund’s Performance: The fund has given returns of 21.38% in the last 1-year and 14.30% average annual returns since inception. The fund has doubled the money invested every 2 years. 

ICICI Prudential Multi-Asset Fund

ICICI Prudential Multi-Asset Fund delivers consistently in line with most funds in its category and has existed since 01 January 2013. The fund has INR 14227 Crores AUM as on 30 June 2022 and has an expense ratio of 1.19%, which is on the higher side. The fund’s asset allocation is 53.78% in equity and 8.82% in debt.

The fund invests mainly in the financial, energy, communication, automobile, and technology sectors. The top holdings are National Thermal Power, ICICI Bank, Bharti Airtel, Reserve Bank of India, and Oil and Natural Gas.  

  • Minimum Investment: SIP INR 100 & Lumpsum INR 5000
  • Fund’s Performance: The fund has provided investors with a 15.07% annual return in the last 1-year while delivering 15.81% average annual returns since its inception. The fund doubled the money invested every 3 years. 

HDFC Multi-Asset Fund

HDFC Multi-Asset Fund is a mutual fund that invests in diverse asset classes and is launched on 01 January 2013. The scheme has an AUM of INR 1595 Crores as of 30 June 2022 and an expense ratio of 0.89%, which is relatively on the higher side. The fund has allocated 54.89% equity and 14.66% in debt. 

The top 5 companies it has invested in are HDFC Gold Exchange Traded Fund, GOI, ICICI bank, Infosys, and HDFC Bank.

  • Minimum Investment: SIP INR 100 & Lumpsum INR 100
  • Fund’s Performance: HDFC Multi Asset Fund has delivered 5.33% average annual returns in the last 1-year and 10.94% since its inception. 

Aditya Birla Sun Life Financial Planning FOF Aggressive Plan

Aditya Birla Sun Life Financial Planning Fund of Funds is a mutual fund that invests using the CRISIL Hybrid 35+65 Aggressive Benchmark. The fund was launched on 01 January 2013 and has an AUM of INR 163 Crores as of 30 June 2022. The fund’s expense ratio of 0.2% is relatively low and currently has an asset allocation of 69.90% in equity and 18.89% in debt.

The top holdings are in SBI Flexicap Direct Fund, Birla Sun Life Equity Fund, Kotak Select Focus Fund, ICICI Prudential Focused Bluechip Equity Fund and Kotak Emerging Equity Scheme. 

  • Minimum Investment: SIP INR 1000 & Lumpsum INR 1000
  • Fund’s Performance: The fund has given an average annual return of 3.74% in the last 1-year, with 12.75% average returns since inception. 

Axis Triple Advantage Direct Plan

Axis Triple Advantage Direct Plan is a fund launched on 01 January 2013 and has invested primarily in financial, technology, automobile, chemicals, and related sectors. The fund has an AUM of INR 1817 Crores, with an expense ratio of 0.64%, which is pretty low. The current asset allocation is 70.30% in equity and 18.05% in debt.

The fund’s top holdings include Axis Gold ETF Fund, Bajaj Finance, ICICI Bank, Avenue Supermarts, and Infosys. 

  • Minimum Investment: SIP INR 1000 & Lumpsum INR 5000
  • Fund’s Performance: The fund has given an average return of 10.37% annually since inception, while the last 1-year return has been -2.46%. The fund has doubled the investment amount every 6 years. 

HDFC Dynamic PE Ratio FoF Growth

HDFC Dynamic PE Ratio Fund of Funds is a mutual fund that invests in other schemes and has existed since 01 January 2013. The fund has INR 30 Crores in AUM as of 30 June 2022 and an expense ratio of 0.2%, less than other multi-asset funds. The fund has allocated 55.21% in equity and 37.54% in debt, with its significant holdings being in HDFC Small Cap Fund, HDFC Top 200 Fund, HDFC Mid-Cap Opportunities Fund, HDFC Short Term Opportunities Fund, and HDFC Low Duration Fund. 

  • Minimum Investment: SIP INR 100 & Lumpsum INR 100
  • Fund’s Performance: The fund has given its investors a 1-year return of 7.07% and delivered 11% annual average returns since inception. The fund has doubled the invested amount every 6 years. 

SBI Multi Asset Allocation Fund

SBI Multi Asset Allocation Fund is a scheme that was launched on 01 January 2013 and had an AUM of INR 558 Crores as of 30 June 2022. The fund has 49.5% invested in equity and 24.11% in debt, with an expense ratio of 0.87%, which is relatively high. Most of its investments are in financial, energy, mining, consumer staples, capital goods, and metals. The top holdings are in GOI, SBI Gold ETF, GAIL India, ICICI Bank, and CESC. 

  • Minimum Investment: SIP INR 500 & Lumpsum INR 5000
  • Fund’s Performance: The fund has given a 1-year return of 4.75% and 10.94% since its inception, doubling the invested amount every 8 years. 

UTI Multi Asset Fund

UTI Multi Asset Fund is a mutual fund scheme that was launched on 01 January 2013 and has an AUM of INR 886 Crores as of 30 June 2022. The fund has a higher expense ratio of 1.07% and currently has allocated 66.13% equity and 10.88% debt. The fund’s top holdings are UTI Gold ETF, GOI, Bharti Airtel, Infosys, and Titan Company. 

  • Minimum Investment: SIP INR 500 & Lumpsum INR 5000
  • Fund’s Performance: The fund has a 1-year return of 3.28% and an average annual return of 7.67% since its inception. 

Quantum Multi Asset Fund of Funds

Quantum Multi-Asset Fund of Funds is a mutual fund that was launched on 22 June 2012 and has since given good returns to investors despite volatility in the market. The fund has an AUM of INR 48 Crores as of 30 June 2022 and an expense ratio of 0.1%, which is very low compared to its peers. The fund’s current allocations stand at 37.02% in equity and 48.61% in Debt.

The primary investments are in Quantum Liquid Fund, Quantum Nifty 50 ETF-IDCW, Quantum Dynamic Bond, Quantum Gold Fund, and Quantum Long Term Equity Fund. 

  • Minimum Investment: SIP INR 500 & Lumpsum INR 500
  • Fund’s Performance: Since inception, the fund has delivered an average 9.14% annual return, with 4.07% returns in the last 1-year. 

Franklin India Multi-Asset Solution Fund

Franklin India Multi-Asset Solution Fund has existed since 07 November 2014 and invests in many asset classes. The AUM is INR 47 Crores as of 30 June 2022 and has an expense ratio of 0.37%, which is average for multi-asset allocation funds. The fund has 34.4% allocation in equity and 1.28% in debt, with its top 5 holdings being Franklin India Bluechip Direct Fund, Nippon India ETF Gold BeES, Franklin India Short Term Income Retail Plan, Franklin India Short Term Income Plan, and Franklin India Retain Plan Segregated Portfolio 2 Direct Growth. 

  • Minimum Investment: SIP INR 500 & Lumpsum INR 5000

Fund’s Performance: The fund has given a consistent return to its investors, with 1-year average annual returns being 4.17% and 5.96% since its inception.

Frequently Asked Questions

Multi-Asset Allocation Funds keep changing their asset allocation per specific rules and market conditions to give optimal returns to their investors. Due to this, it is ideal for holding onto a Multi-Asset Allocation mutual fund for at least 5 years, with the longer horizon improving the chances of generating a higher return.

Multi-Asset Funds do not invest in any particular industry, asset class, or segment. The allocation percentage for each fund is determined by the fund’s objective and the strategy adopted by the fund manager. 

On average, Multi-Asset Allocation Funds have given investors an average return of 10.63% in the last 5 years and 8.84% annualized annual returns in the previous 10 years. 

Since Multi-Asset Allocation Funds invest in different asset classes, any volatility or hit to a particular asset class is not felt by the overall fund. This helps the overall returns to be consistent despite market fluctuations and allows investors to get relatively reduced volatility. 

Investors looking for alternatives to a fixed income or those who want to gain marginally better returns with a lower risk appetite can invest in multi-asset allocation funds. Since the fund doesn’t invest in any particular asset class or instrument, it is ideal for beginners and those who do not have much financial knowledge.

A fund with an expense ratio of greater than 1% – 2% is considered high for multi-asset allocation funds, and investors should compare the expense ratio when planning their investments.

There are no fixed expense ratios that mutual fund houses must abide by when investing in multi-asset allocation funds, and fund managers can fix an allocation for each index per their investment goal. 

Investing in Multi-Asset Allocation Funds is very easy using the 5paisa app. Here are the steps you need to follow – Download the 5paisa app or log in using the website, head to the mutual fund section and choose ‘Multi-Asset Allocation Funds.’ Once selected, you can get a list of funds to invest in. You can choose SIP or Lumpsum and complete your KYC registration to complete your investment. 

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