Are Multi-Asset Funds For You?

Consider them if you wish to allocate in commodities in the hybrid fund space beyond the usual equity and debt

- Narayan Krishnamurthy

There was a time when one visited the neighbourhood doctor for any health scare. These doctors knew generations of family members and their health issues. This helped them in treating those sick. Investing was no different, with mutual funds donning the hat of doctors. As most investors either sought wealth-creation or income-generation, the schemes offered solutions considering the risk investors could take. With time, mutual funds have evolved to cater to unique investment needs to provide specialised solutions. There are several types of equity and debt schemes and many hybrid funds have emerged over time to meet investor needs based on the risks involved.

The multi-asset fund category has caught the fancy of investors in recent times. Some of it perhaps also has to do with the news it made when it witnessed the highest inflows of Rs 1,711.4 crore in December 2022, according to the Association of Mutual Funds in India. Multiasset funds aren't new; these are a type of hybrid funds that have been around ever since market regulator SEBI re-categorised mutual funds, providing a clearer scope for what multi-asset funds could do. Investors have been using funds to split between equities and debt for a long time and it is still a very popular way of investing.

MULTI-ASSET FUND POSITIONING

The virtues of asset allocation are well documented and get reinforced once every few years owing to events that remind us that, ultimately, investing is all about asset allocation. Predicting asset class returns is a futile exercise and it is best to spread your investments across asset classes to optimise investment returns by managing investment-related risks. Given the paucity of time and lack of expertise, investments in mutual funds are suited for most investors looking to take advantage of asset allocation principles.