What is Multi Asset Allocation?
Hybrid mutual funds which can invest in an extra asset class, apart from equity and debt, are called Multi Asset Allocation funds. Such funds, typically, invest in three asset classes with a minimum of 10 percent allocation required for every class. The allocation of resources into multiple assets thus lowers the risk in investment.
Features of Multi Asset Allocation Funds
Here are the most defining features of Multi Asset funds:
- Low Risk Involved
The investors of Multi Asset Allocation funds are more exposed to a number of assets as compared to other hybrid funds. In a diverse portfolio, every asset has its own risk-return profile and the performance differs during every market cycle. This, thus, attenuates the overall risk involved.
- Portfolio Returns
Investing in Equities and Debt has its own drawbacks. For short-term investments, Equity is considered the most volatile form of investment and debt gives stability. Whereas for long-term investments, equity gives higher returns and debt gives a moderate return.
In that case, investing in varied asset classes prove to be benefiting as even when a single class performs good, the overall portfolio returns are supported. The risk of losing money is eventually reduced.
- Automated Rebalancing of Portfolio
Professional fund managers of Multi Asset Funds undergo with a recurring rebalancing of the portfolio. They book the gains from the asset which is performing well and invest the same in the assets which are underperforming. The periodic analysis of the gains at higher level and their reinvestment at lower level ensures the credibility of the portfolio over the long-term.
- Pre-devised Portfolio
A fully-developed portfolio is handed over to the investors, carved at the hands of the professional fund managers. It is a great investment avenue for investors who are not willing to subscribe to too many funds. In that case, multi-asset allocation funds becomes the best investment option as they provide adequate exposure to multiple assets in one single investment plan.
- On Flexibility
The Multi asset allocation funds are considerably not flexible as the portfolio comes pre-defined. The investors may or may not prefer the assets in which the fund manager has invested but they cannot alter the allocation of the assets according to their expectations.
- On Expense ratio
Such type of mutual funds are not very popular amongst the investors. The small size and limited reach has rendered these funds a relatively low Assets Under Management (AUM). Henceforth, the expense ratio involved in these funds is higher compared to other hybrid funds.
List of Multi-Asset Allocation Funds in India
Here is a list of multi-asset allocation funds in India:
|Fund Name||AUM (Cr)||1-Year||3-Year||5-Year|
|ICICI Prudential Multi-Asset Fund – Direct Plan||10,941.67||1%||9%||9%|
|ICICI Prudential Multi-Asset Fund – Institutional – Regular Plan||10,941.67||1%||9%||9%|
|ICICI Prudential Multi-Asset Fund – Regular Plan||10,941.67||0%||8%||8%|
|UTI Multi Asset Fund – Direct Plan||729.92||-1%||5%||4%|
|UTI Multi Asset Fund – Retail – Regular Plan||729.92||-2%||4%||4%|
|Axis Triple Advantage Fund – Direct Plan||262.99||5%||7%||8%|
|Axis Triple Advantage Fund – Regular Plan||262.99||3%||5%||7%|
|SBI Multi Asset Allocation Fund – Direct Plan||258.34||8%||7%||9%|
|SBI Multi Asset Allocation Fund – Regular Plan||258.34||7%||6%||8%|
|HDFC Multi-Asset Fund – Direct Plan||177.52||0%||5%||6%|
|HDFC Multi-Asset Fund – Regular Plan||177.52||-1%||4%||6%|
|Essel 3 in 1 Fund – Direct Plan||19.99||4%||5%||7%|
|Essel 3 in 1 Fund – Regular Plan||19.99||2%||4%||5%|
|Quant Multi Asset Fund – Regular Plan||0.1||10%||5%||7%|
|Quant Multi Asset Fund – Direct Plan||0.1||10%||5%||7%|
Tax treatment in Multi Asset Allocation Funds
As far as taxation is concerned, Multi Asset funds are known to be the best mutual funds.
- A fund is categorised as a debt fund if it has incorporated less than 65% in equity. This means that even when an investor has allocated only 45% of the assets in equity, the returns from equity will be treated like that of debt fund for taxation.
- Short-term capital gains (STCG) are combined with income and taxed. On the other hand, long-term capital gains (LTCG) are taxed at 10% (with indexation benefits) and 20% (without indexation benefits).
Who should invest in Multi-Asset Allocation funds?
Multi asset funds are comparatively less risky than other funds which makes them suitable for investors who are not willing to allocate their resources in volatile funds. However, there are investors who understand that diversification can be of great benefit and balanced portfolios might be riskier than they appear. Moreover, multi asset funds can be the best option to invest for the individuals who are not inclined to holding too many funds. The diverse portfolio thus gives them the exact exposure to different assets in one single investment.