Are multi-asset funds the right product in a soaring market?

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real estate investment trusts, infrastructure investment trusts, etc. They are seen as a one-stop solution for every investor’s asset allocation needs. But not all multi- asset funds are the same.

Some invest in international equities; others do not. Some tend to keep their equity exposure low; some can take it much higher. Also, every multi-asset fund is taxed differently.

Here is what you need to know about these funds. The top-five multi asset funds in terms of assets have delivered three-year rolling returns of 12% on an average between 1 January 2016 and 14 September 2023. These funds have delivered a maximum of 30% three-year returns; the minimum is -2.4% (see graphic).

Only those funds that have been in existence for more than five years have been considered for calculating the returns. A well-managed multi-asset fund can help investors reduce overall volatility on their investments. The funds analysed showed a standard deviation of 5.7% on an average.

Standard deviation is a measurement of volatility. Ihab Dalwai, fund manager at ICICI Mutual Fund, says equity has historically delivered higher returns than other asset classes, while a multi-asset fund can help reduce the volatility risk that comes with investing in a single asset class like equity. “In the current environment, with high equity valuation and corporate profitability relative to gross domestic product (GDP), we believe our multi-asset fund should have less equity exposure than what we have maintained in the past three years," Dalwai says.