Investors beware ! Check if your fund is truly multi asset (2024)

In the last few months, investors have been making a beeline for multi asset mutual funds. The reasons are obvious. The current economic environment looks slightly uncertain. Inflation is rising, interest rates are high and there is a lurking fear of recession. In times like these, multi asset funds are considered a safe bet for stable returns.

Multi asset mutual funds are those than invest the corpus across multiple asset classes like equity, debt and commodities. The broad rule is that the fund manager must invest a minimum of 10% of the corpus in each of these asset classes. But does this really make it a true multi asset fund? For example, an investment of 80% in equities and just 10% each in debt and commodities will impact the fund performance adversely should the stock markets crash.

A true multi asset mutual fund is one which invests across assets in a pre-decided manner. A pre-decided asset allocation ensures true diversification and the proportions of asset classes, therefore, should not change as per market conditions. Take the example of the Nippon India Multi Asset Fund. It is the only multi asset fund that invests across four asset classes in fixed proportions. It invests 50% on India Equity (growth), 15% in Debt (relative stability), 15% in Commodities (low correlation with equity) and the balance 20% in Foreign Equities (global growth possibilities). This allocation of 50:20:15:15 (irrespective of the market scenario) makes it a true-to-label Multi Asset Fund.

Almost all other multi asset funds like those from the house of Kotak, UTI and Tata invest their corpus across three asset classes, equity, debt and commodities and largely don’t follow a fixed allocation formula.

Financial planners advise investors that their portfolio needs to be diversified across asset classes so that even in volatile times, not only is there investment protected but they get decent returns as well. And while choosing a multi asset fund, they must invest in a fund which is true to its theme.

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