Investors are showing a lot of interest in multi-asset funds considering how some of them are posting very impressive returns over the past few years. Apart, this is the only category left in mutual funds to enjoy indexation benefits, thus, explaining more asset management companies inundating the already crowded market with their multi-asset new fund offers (NFOs).
Multi-asset allocation funds, by default, invest in at least three different asset classes with a minimum allocation of 10 per cent to each one of them. By doing so, they allow investors to put their money in different asset classes under one roof without having to worry about how to allocate and rebalance their asset investments by themselves. However, are these reasons good enough to invest in them?
This is a question that investors have asked with more mutual fund houses now queuing up with their multi-asset mutual fund offers. Take, for example, the recent launch of Shriram Multi Asset Allocation Fund by Shriram Mutual Fund on August 18, 2023. The fund offer would be in vogue till September 01, 2023, thus, allowing enough time for investors to decide if they would like to put their money in an open-ended scheme investing in equity, debt & money market securities, gold/silver ETFs, and related instruments.
Ascertaining utility of multi-asset funds
Unlike most other mutual funds, muti-asset funds are neither equity funds nor debt funds. Unlike equity funds that continue to be volatile, debt funds that have a dependable character depending on many factors, and commodities whose price movement is largely governed by external and macro factors, multi-asset funds combine the attributes of all the asset classes they represent. This leaves new investors excited to invest their money in such NFOs that combine the uniqueness of all these asset classes. No doubt, the cocktail of such asset classes is a unique characteristic that lends these funds its charisma. However, should investors consider having at least one multi-asset mutual fund in their investment portfolios?
Priyadarshini Moreshwar Mulye, a SEBI Registered Investment Advisor and Founder, ARTHA FinPlan said, “Multi-asset funds are a type of funds which give exposure to different asset classes like equity, debt, real estate, commodities like gold. This exposure in turn gives diversification to investment. However, investors should consider his/her risk appetite, set future goals and investment horizon before investing.”
Choosing between NFOs and existing funds
This is not the first multi-asset fund launched in the market. Before this, many asset management companies (AMCs) have launched such multi-asset funds, thus, allowing inclined investors to avail of returns corresponding to the total returns of the securities in this particular index. These include:
Name of the fund | Five-year returns (in %) |
| Quant Multi Asset Fund | 21.65% |
ICICI Prudential Multi-Asset Fund | 15.40% |
HDFC Multi-Asset Fund | 11.92% |
Axis Multi Asset Allocation Fund | 11.42% |
SBI Multi Asset Allocation Fund | 10.67% |
UTI Multi Asset Fund | 8.80% |
| Source: MoneyControl | |
New investors look forward to participating in NFOs as most want to benefit from the low net asset value (NAV), which is ₹10 at the time of the offer. With so many multi-asset funds performing well, they hope that early participation in a new fund will help yield more returns in the long run.
With so many funds already available to choose from, why should one opt for a new fund whose performance details are not available? This is a question mostly posed by veterans who tend to look and compare the past five to 10-year returns or year-on-year rolling returns before deciding where to put their money.
Abhishek Murarka, Vice President, ICICI Securities advised, “There is no absolute rule, but my comfort is more in existing funds over NFOs. I can evaluate the risks involved and have my return expectations in place before investing. Often NFOs carry some risks as they are Funds of Funds where investors don't know the underlying or they are brought to market after a big run-up in a sector. I like to think of NFOs as desserts and existing funds as the main course in my Mutual fund diet plan. So I will keep trying some NFOs to get exposure to specific themes, but my main course will always be existing funds.”
You cannot ignore the ubiquity and effect of market volatility. The diversification of investments helps investors to gain from continued earnings. Multi-asset funds help in diversifying adequately. However, in the end, it all depends on your understanding of investments and how you sync them with your financial goals.
To invest or to not invest is a decision that you must not take in a huff; you must rather ponder over it again and again. Better if you consult a professional advisor to benefit from his expertise and experience.
