It is not a news anymore that we are witnessing unusually volatile times of declining market, rupee’s steep fall and crude oil kissing new heights. Although as investors, we can’t influence — let alone control — any of these occurrences, but we can do is to calibrate our response to these changes. This underscores the need to maintain a well-rounded portfolio with exposure to risky as well as safe assets.
Multi asset funds, in such times, offers a good recourse to a conservative investor. Unlike active hybrid funds that invest a minimum of 65 percent in equity - multi asset funds allocate a minimum of 10 percent each to equities, debt and gold. Since gold tends to do well in times of geopolitical tensions and unstable times, these funds with allocation to safe haven are geared to face volatility with more vigour and ammunition.
To be able to understand the significance of multi asset funds, one must first learn the benefits of portfolio allocation. “In case your portfolio has 60 percent equity allocation, and because of massive rise in market index, it jumps to 80 percent simply because of mark-to-market phenomenon. Then you may get greedy and would not want to sell your stocks. The reverse is also true when your 60 percent allocation in equity declines to 40 percent. Here, investors may get fearful. So, multi asset funds help you get rid of your greed as well as fear,” says Amol Joshi, Founder, Plan Rupee Investment Services.
“If you are between a conservative to moderate investor, and do not want to see much volatility, you could opt for multi asset funds,” adds Joshi.
When asset prices rise beyond your comfortable range, it is advisable to rebalance your portfolio. This rebalancing entails cost including exit load. But when a fund house manages a fund, investor doesn't need to get bothered by these costs.
Returns posted by multi asset funds in the past one year
|Fund||One-year-return (%)||Benchmark (%)|
|Axis Triple Advantage||11.36||9.78|
|HDFC Multi Asset Fund||12.32||8.68|
|ICICI Prudential Multi Asset Fund||24.31||10.19|
|SBI Multi Asset Allocation Fund||11.87||7.23|
|Tata Multi Asset Opportunities Fund||12.84||--|
It is vital to note that funds in the category of multi asset tend to follow different strategies, and allocation to equities can fluctuate. While some funds may have a more fixed asset allocation while others could be more dynamical in their allocation. Some could be managed actively, while others invest in passive funds.
This calls for the need to remember certain key things before you park your cash in multi asset funds. First and foremost, you must check the equity exposure of the fund you have zeroed in on. Another consideration that should weigh in your decision making is your investment horizon.
Remember that these is not a short-term investment and these funds can be a good option only if your investment horizon is longer than three years.