Equity markets have experienced increased volatility over the past year, with the Sensex falling nearly 4% during this period. Short-duration debt, however, has delivered a return of about 5.38% during the same timeframe. According to reports from Business Standard, this volatility has brought focus back on diversification, spreading investments across different asset classes to reduce dependence on any single market segment.
Multi-asset allocation funds have emerged as the fastest-growing category among hybrid funds, attracting significant investor interest. According to data from the Association of Mutual Funds in India (Amfi), investors put ₹3,753 crore into multi-asset allocation funds in July, marking the 59th straight month of inflows into the category. The asset base of this category has risen 58.3% over one year and increased 501.8% over three years, as reported by Business Standard. This diversification trend is part of a broader movement where investors are seeking alternative asset classes beyond traditional equity investments.
Multi-asset allocation funds have delivered healthy returns across different investment periods. According to data available with Value Research, the category's average return was 12.91% over one year, 15.48% over three years and 13.04% over five years. These funds invest across asset classes such as equity, debt, commodities and cash through a single portfolio, with the objective to reduce dependence on any one asset class and keep the portfolio balanced across different market cycles.
Financial experts emphasize the importance of proper asset allocation in the current market environment. Sanjay Bembalkar, head of equity at Union Mutual Fund, stated that multi-asset strategies allow investors to invest across assets and provide flexibility to alter allocation when market conditions change. Gurmeet Singh Chawla from Master Portfolio Services noted that asset allocation has become more important than stock-picking in the current environment amid interest-rate uncertainty and geopolitical risk.
Experts recommend a structured approach to portfolio rebalancing for multi-asset funds. According to Business Standard reports, investors should review their portfolio every six months and rebalance when there is a significant change in income, financial goals or risk appetite. Harshad Borawake from Mirae Asset Mutual Fund emphasized that rebalancing should be based on material deviation from planned allocation rather than market movements alone. Multi-asset funds provide professional management and periodic rebalancing, reducing the need for investors to constantly track different asset classes.
