MULTI-ASSET ALLOCATION FUNDS: Ensure fund's equity exposure and strategy match your risk appetite

A recent analysis by Ventura Securities of 25 multi-asset allocation funds (MAAFs) reveals that many of these funds have outperformed a large number of equity schemes over 1-5-year timeframes.

- LARISSA FERNAND

Multi-asset funds must hold a minimum of 10 per cent in three asset classes: equity, debt, and gold.

Beyond this, they have the leeway to layer the fund with global equities, exchange-traded commodity derivatives (ETCDs), gold and silver exchange-traded funds (ETFs), real estate investment trusts (Reits), and infrastructure investment trusts (Invits).

By diversifying, these funds aim to capture gains in some assets while mitigating losses in others.

Their popularity has increased as stock valuations remain high.

Returns rotate

The basic premise behind multi-asset funds is that asset classes perform differently depending on economic cycles and market phases.

Debt yielded strong returns in 2014 and 2016, but faltered in 2022.

A decade ago, gold lagged from 2013 to 2015, while equities excelled.

Currently, gold is surging while equity markets face volatility.

Investors often latch on to an asset class after it has moved up considerably.