Multi-asset funds offer consistent returns if not quite the big bang

Multi-asset funds that combine equities, gold and fixed income are designed to smooth portfolio volatility, but their role extends beyond just reducing drawdowns. Over the past 16 years, actively managed multi-asset portfolios have outperformed domestic equities, delivering an annualised return of 11.4% compared with 10.7% for the BSE Sensex TRI, or Total Returns Index, according to a study by WhiteOak Capital.

The strategy has, however, lagged higher-returning asset classes such as gold and global equities, with 14.7% and 18.6% annualised returns, respectively, over the same period. “How gold, equity or debt behaves in isolation is very different from how a well-constructedcombination performs,” said Aashish Sommaiyaa, ED & CEO, WhiteOak Capital Mutual Fund.

The study analysed a model portfolio allocating 25% to the BSE Sensex TRI, 45% to the CRISIL Short Term Bond Index, 25% to gold (MCX) and 5% to the S&P 500 TRI, with annual rebalancing. The key trade-off is consistency. The multi-asset portfolio did not post a loss in any calendar year, compared with domestic equities, international equities and gold, which recorded losses in four, one and two years, respectively.

In a multi-asset portfolio, gold helped offset equity weakness through FY25 and into FY26. While equities underperformed after September 2024, with the Sensex TRI gaining 6.4% in FY25 and shedding 6% in FY26, gold’s run-up of 32% and 65% in these two financial years on safe-haven demand provided a counterbalance, driving overall portfolio returns.

This has boosted the popularity of multi-asset allocation funds, which have garnered ₹65,210 crore, or 62% of net inflows in the hybrid category, in 2025–26. Though allocations to various assets vary depending on the fund houses, investors are taking comfort in their stable returns compared to the wild swings in equities.

“Many investors get scared of equity, especially when drawdowns like March happen, and they lose two years of returns in a short time frame,” said Vineet Nanda, founder, SIFT Capital. “In such times, people holding pure equity funds tend to lose patience and opt for multi-asset products.”“A big advantage is the scheme rebalances assets at regular intervals with no tax implication for the investor,” said Juzer Gabajiwala, director, Ventura Securities.