Multi-asset funds reward tactical bets amid volatile market

Mumbai: For investors who thought simply investing in any multi-asset allocation fund was a sure-shot winning strategy, the past year offered a reality check. Returns from this category, positioned as an all-weather product with allocations spanning equities, debt, precious metals, international equities, REITs and InvITs, ranged from 3.3% to 24.6% in the past year, according to data from ValueMetrics Technologies, reflecting the sharp divergence in performances.

The popularity of multi-asset allocation funds soared in the past year, with the category’s assets swelling to ₹1.87 lakh crore from ₹1.13 lakh crore a year earlier, as volatile equities and strong but erratic performances in gold and silver made investors to leave asset allocation to fund managers. These funds are mandated to allocate a minimum of 10% to equity, fixed income and precious metals, but the sharp divergence in returns shows that performance hinges less on the category itself and more on whether money managers got their asset allocation calls right. Those with a higher allocation to gold and silver emerged on top. Kotak Multi Asset Allocation, Quant Multi Asset Allocation, DSP Multi Assset Allocation, HSBC Multi Asset Allocation and Bandhan Multi Asset Allocation were among the top performers last year.

In the year ahead, with equity markets expected to test money managers again, their challenge will lie in remaining ahead of the curve. “The ability to tactically switch between asset classes, actively manage duration, and selectively position within equities across market caps and sectors will remain important,” says R Sivakumar, chief investment officer, Axis Mutual Fund.

For instance, Sivakumar believes that while large caps are turning relatively more attractive from a valuation perspective, earnings growth continues to remain better in segments of mid and small caps, making it critical to make selective bets rather than take a broad-based market view. Equity exposure of the top schemes in the category stood in the range of 36% to 73% of their AUM, while allocations to debt and arbitrage were between 14% and 41%, underscoring the variance in asset allocations across fund houses.

“Our endeavour is to build a portfolio that can navigate changing market cycles through disciplined asset allocation rather than frequent tactical shifts driven by near-term market moves,” says Harish Krishnan, chief investment officer – Equity, Aditya Birla Sun Life Asset Management, whose multi-asset product has one of the highest exposures to equities at over 70% as on April 30, 2026.

The category had 34 schemes and 53.50 lakh folios as of April 30. In the last twelve months alone, the category has received net inflows of ₹68,217 crore.

Unlike zeroing in on an equity fund, deciding on multi asset allocation fund is far more challenging. Within the multi-asset category, there are schemes whose goal is just to beat the Nifty with low volatility and hence have around 65-70% to equity, with the balance allocated to fixed income and precious metals. Similarly, there are some with a lower allocation of 35-40% to stocks and bring in a blend of precious metals, REITs, InvITs and international equities to diversify portfolios.“Investors need to assess the agility of the portfolio manager, regularly read commentary to understand positioning and then choose the scheme which meets their portfolio needs,” said Manuj Jain, Co-founder, Value Metrics Technologies.