Multi-asset allocation funds demonstrated robust investor confidence in June, with inflows reaching ₹4,810.76 crore, representing a significant 22.46% month-on-month increase from May's ₹3,928.51 crore, according to data from the Association of Mutual Funds in India (AMFI). As reported by Mint, these funds emerged as one of the largest contributors to inflows into hybrid mutual funds during the month.
The strong inflows occurred amid heightened market volatility driven by multiple factors including geopolitical tensions, foreign capital outflows, rising inflation concerns, potential interest rate hikes, and sharp movements across equities, gold, and other asset classes. According to Mint, this environment has led investors to increasingly favour diversified investment strategies as a hedge against market uncertainty.
G Chokkalingam, founder and head of research at Equinomics Research, explained that multi-asset allocation funds reduce risk from equity asset class while utilising opportunities in other asset classes like precious metals for alpha creation and using fixed income assets to ensure moderate returns during tough equity market periods. As reported by Mint, these funds are required to invest at least 10% of their portfolio in each of the three asset classes under SEBI regulations.
According to Mint, several multi-asset allocation funds have delivered positive returns over the past six months despite market volatility. The Nippon India Multi Asset Allocation Fund Direct Growth has generated an annualised return of around 20% over the past three years, while other top-performing schemes include multi-asset funds from SBI, Aditya Birla Sun Life, and Motilal Oswal, which posted annualised returns of approximately 17%, 17%, and 14% respectively during the same period.
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, highlighted that multi-asset funds offer tax advantages as funds with minimum 65% equity exposure are treated as equity funds for taxation, meaning long-term capital gains are exempt from tax up to ₹1.25 lakh and gains beyond that are taxed at only 12.5%. As reported by Mint, the built-in diversification across equity, debt, and commodities like gold provides protection against market volatility while offering decent inflation-beating returns with low risk.
