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    Multi Asset Allocation Funds

    Invest in the best multi asset allocation funds recommended by Scripbox that are algorithmically selected that best suit your needs

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    List of Multi Asset-allocation Mutual Funds

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    Fund NameScripbox Opinion
    Till Date CAGR

    ICICI Prudential Multi Asset Fund Institutional (G)

    0.8%

    9.8%

    12.8%

    13.7%

    18.5%

    10.8%

    15.4%

    21.6%

    14.1%

    17.1%

    14.1%

    17.1%

    18.5%

    10.5%

    18.5%

    10.5%

    9.3%

    12.2%

    14.7%

    10.1%

    28.4%

    10.2%

    -

    35.7%

    13.3%

    8.7%

    14.8%

    8.9%

    12.8%

    7.4%

    12.7%

    7.7%

    8.8%

    12%

    28.5%

    10.2%

    12.9%

    7%

    12.7%

    7.7%

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    How does Scripbox rate funds?

    Proprietary 4-step system to rate mutual funds

    We use a proprietary system to rate mutual funds and based on that make a recommendation or rate the fund as top ranked.

    What Scripbox recommendations mean?
    Scripbox algorithm recommends 2-4 funds for investment for an investment asset class such as large cap, diversified, liquid etc. When you invest for an objective, the algorithm suggests the appropriate asset class and funds.
    Track Record

    Track Record

    We look at consistent and long historical performance for our analysis.

    Fund Size

    Fund Size

    We look at the size of the fund with respect to other funds in the category. Larger funds are preferred.

    Sub-asset Class View

    Sub-asset Class View

    We check if the sub-category of the fund is recommended by us.

    Fund Performance

    Fund Performance

    Consistency of performance over various tenures is analysed for a relative performance stack.

    Track Record

    Track Record

    We look at consistent and long historical performance for our analysis.

    Fund Size

    Fund Size

    We look at the size of the fund with respect to other funds in the category. Larger funds are preferred.

    Impact of Interest Rates

    Impact of Interest Rates

    We check the relative interest rate risk of the sub-category of the fund. Lower the better.

    Credit Attractiveness

    Credit Attractiveness

    We check the credit quality of the underlying instruments present in the fund. Higher the better.

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    What are Multi Asset Allocation Funds?

    Multi Asset Allocation funds, as the name suggests, are a type of mutual fund that invest across different asset classes by investing in different securities. The most common asset groups that these funds invest in are equity, debt, and gold.  Therefore, this fund intends to create a portfolio that comprises more than one asset class. One can invest in multi asset allocation funds through the SIP route and lump sum route. 

    As per SEBI Regulations, a multi asset allocation fund should invest at least 10% of its portfolio in three or more asset classes. Hence, this fund gives investors the benefit of exposure to a diversified portfolio. Furthermore, SEBI does not impose any restrictions as long as the 10% rule in three asset classes is followed. Thus, a fund manager can also choose to invest in a small cap, large cap or mid cap equities based on the fund’s objective. 

    The fund manager of the fund house plays an important role in these types of funds. They will allocate funds in these asset classes based on how the economy and markets are performing. For instance, if the stock market is going up, the fund manager will increase the exposure towards equity while reducing the exposure towards debt instruments. On the other hand, if the fund manager is negative about the economy, then he/she might increase the exposure towards related gold instruments and reduce allocation towards equity or debt instruments. 

    Advantages of Investing in Multi Asset Allocation Funds

    The following are the advantages of investing in multi asset allocation funds.

    Portfolio Diversification

    One of the major advantages of multi asset allocation funds is it enables investors to add different asset classes to their portfolios. This helps investors with steady growth across different market cycles. Also, it reduces the risk overall on the portfolio. 

    Portfolio Rebalancing

    Portfolio rebalancing is very important as it ensures that the investments earning returns are well distributed in those asset classes than others. Therefore, the multi asset allocation fund does the rebalancing and asset reallocation. This is the key to a healthy portfolio to tide through market ups and downs. 

    Readymade Portfolio

    Generally, a well diversified investment portfolio can be created by a  professional. Therefore, a multi asset allocation fund helps investors with a well balanced portfolio keeping the risk and reward in mind. Moreover, investors can avail the benefit of investing across asset classes through one type of fund. 

    Entry and Exit

    This fund does not charge the investors any amount either while entering the scheme or exiting the scheme. The investors can enter the fund anytime. Also, if the investor has redeemed 10% of the investment within a year, no exit charges are applied. However, if the amount exceeds 10% within a year, an exit load of 1% is charged. Furthermore, no exit load is charged if the investor withdraws after one year. 

    Limitations of Investing in Multi Asset Allocation Funds

    Even though diversification is one of the major advantages of a multi asset allocation fund, there is a risk involved in each type of asset class that the fund invests in. For instance, market risk is involved in equity funds. There is interest rate risk in debt funds which can affect the returns of the fund. The prices of gold also fluctuate. Also, if the fund has invested in real estate, then there is liquidity risk. 

    Therefore, the fund manager must consider all the factors while selecting a fund. Also, if the fund manager lacks the required expertise, then selection on funds might go wrong. This might, in turn, affect the performance of the fund. Furthermore, if the investor has an investment horizon for the long term, the overall risk on the portfolio reduces to a great extent. 

    Who should Invest in Long Multi Asset Allocation Funds?

    Long multi asset allocation funds invest in securities across different asset classes. Therefore, one should have a long investment horizon, i.e. above three years, while investing in these funds. This fund is suitable for investors who are not willing to take a higher level of risk. Also, this is for investors who are looking for stable and consistent returns from their investments. 

    Investing in multi asset allocation funds provides a diversified fund portfolio to the investor. Hence, portfolio diversification mitigates the risks associated to a great extent and provides steady returns. Moreover, it helps to even out the risk of investing in just one type of asset class. Also, there is a steady flow of income for the investors even when some asset classes are underperforming more than usual. Additionally, the equity exposure in this scheme offers capital gains in the long run. Overall, the investor must check the portfolio of multi asset allocation funds before they invest in them. 

    Things To Consider Before Investing in Multi Asset Allocation Funds

    Portfolio Diversification

    According to SEBI, a multi asset allocation fund should invest a minimum of 10% in three asset classes. This means that the investor gets exposure to three different asset classes by investing in a single scheme. However, the minimum limit of 10% might compromise the element of diversification. Therefore, before making a purchase, investors must ensure that they go through the scheme-related documents carefully.

    Investment Goals

    Every investor must create a well diversified portfolio based on their financial goals. Although, a multi asset allocation fund provides a diversified investment portfolio. This does not serve the purpose for the individual investor as it might not be in line with their financial objectives. Therefore, as an individual investor, one should invest in funds keeping in mind their investment objectives over a period of time. 

    Fund Manager

    Like any other mutual fund, the fund manager’s role plays a crucial role in this scheme. The reason is, there is no specific investing style for this scheme. For instance, a fund manager might invest 30% of its corpus in equity without a predetermined style. Hence, the fund manager can choose stocks from any sector or market capitalization. Some funds might declare these aspects in the scheme related documents. Therefore, the investor needs to check the fund’s track record and the fund manager before investing. 

    Fund returns

    Multi asset allocation funds do not guarantee returns. One has to invest in these funds for a longer duration to generate significant returns. Since this fund invests in multiple asset classes, one has to be patient and not worry about the short term market fluctuations. 

    Investment costs

    Mutual funds have certain costs associated with them. They are in the form of the expense ratio and exit load. The expense ratio includes the fund management closets, transaction costs, etc., which are charged from the investors through NAV. Thus, this reduces the profits for the investors. On the other hand, exit load is when the fund house deducts when the investor exits the fund before the stipulated time. Therefore, investors must check that expenses ratios are not too high while selecting a fund. 

    Financial Ratios

    There are many financial ratios that one can use to evaluate the performance and compare the mutual funds. These ratios help to measure the performance of the fund against the index, risk of the fund, the trading activity in the fund, deviation of the fund return from its benchmark and much more. One should consider some of the ratios while investing in multi asset allocation funds: alpha, beta, standard deviation, Sharpe ratio,  portfolio turnover ratio, rolling returns, r-squared, etc.  

    Taxation

    The taxation of multi asset allocation funds depends on the exposure towards equity or debt asset class. If the equity exposure is more than 65%, the scheme is taxed like an equity mutual fund. If not, then it is taxed like a debt mutual fund. The following table shows the taxation of capital gains for multi asset allocation funds. 

    Additionally, from FY 2020-2021, the dividends are taxable in the hands of the investors as per their income tax slab rate. Additionally, dividends above INR 5,000 are subject to a TDS of 10%. Moreover, equity funds are subject to securities transaction tax (SST) of 0.001% if investors sell the units.

    FundsShort Term Capital Gains (STCG)Long Term Capital Gains (LTCG)
    Equity oriented fundHolding Period: less than 12 months
    Tax: at flat 15% in the investor’s hands irrespective of the income tax slab rate. 
    Holding period: 12 months or more
    Tax: Capital gains up to Rs. 1 lakh is exempted per PAN card. Anything above Rs. 1lakh is taxable at 10%
    Debt oriented FundHolding Period: less than 36 months
    Tax: the capital gains are added to the overall income and taxed as per the individual income tax slab rate.
    Holding Period: 36 months or more
    Tax: Capital gains are flat 20% after indexation. 

    Conclusion

    Multi asset allocation funds can be a good addition to the investor’s portfolio if the scheme is selected carefully. However, this cannot be the only alternative to diversify a portfolio. One should invest in different asset classes to build a well-designed portfolio that aligns with the financial goals and investors risk profile. Overall multi asset funds can help investors during dynamic market movements and their effect on different asset classes. 

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