A category which invests across equity, fixed income, REITs, gold, international equity and commodities, multi-asset funds have added 300,000 folios in the last one year, and assets under management of these schemes have moved up 55% from ₹20,400 crore to ₹31,600 crore.
“India presents a unique and compelling growth story for the coming decade, powered by strong fundamentals and several ongoing structural reforms. As a result, the Indian market valuations are high compared to several other markets,” said S Naren, chief investment officer at ICICI Prudential Mutual Fund.
However, there could be sporadic volatility due to global macroeconomics, monetary policy choices, and geopolitical situation. “Hence, rather than investing in just one asset class in such a situation, investors would be best to take a multi-asset approach,” Naren said.
While the broader equity market represented by the Nifty 50 has moved up 21.86% over the last one year, gold jumped 13.95% and fixed income (liquid funds) returned 6.24%.
Given this run-up across all three asset classes, financial planners believe investors need to stick to their asset allocation, without having a bias to any asset class.A study shows that since 1999, equity has been the best performing asset class in 12 years. Debt and gold have been the best performing asset classes in five and seven years, respectively, thereby making it difficult for an investor to predict what will do well.
“It is important to balance portfolios and reduce risk using a mix of equity, debt and gold,” said A Balasubramanian, CEO of Aditya Birla Sunlife Mutual Fund. “A multi-asset fund that combines these three assets can be considered as a core allocation for investors’ portfolio as it helps you maintain discipline.”
Financial planners point out that investing across non-correlated assets pays off over the long term and generates superior risk adjusted returns with low volatility.
Financial planners believe these funds are a good starting point for first-time investors as they give exposure to different asset classes through a single product.
“These schemes offer ease of investment as the fund manager changes the allocation in the portfolio as per the valuation of each asset class,” said Shital Shah, founder of AG Financial Services. These schemes are getting evolved as they are new asset classes like REITs, silver, other commodities, and international equities, apart from conventional equity, arbitrage, gold and debt, Shah said.
