August 9, 2023

Multi Asset Allocation Fund

Multi Asset Allocation Fund

A Multi Asset Allocation Fund is a type of mutual fund that invests in a mix of different asset classes such as equities, bonds, gold, and even real estate. The aim of these funds is to provide diversification and balance to the investor’s portfolio. 


Multi Asset Fund

A Multi Asset Fund, just as the name suggests, is a mutual fund scheme that invests in more than one asset class. These asset classes may include equities, debt, gold, real estate, commodities, etc. The idea behind such a fund is to offer investors exposure to a broad range of assets in a single investment, thereby optimising the risk-return trade-off.

The proportion of the different asset classes in the fund portfolio can be fixed or flexible depending on the fund’s mandate. For instance, a multi-asset fund may have a flexible mandate where the fund manager decides on the allocation based on market conditions. 

In such a case, during an equity bull market, the fund may have a higher allocation to equities. In contrast, during uncertain times, the allocation could be tilted towards safer debt instruments.

Advantages Of Multi Asset Fund

The primary advantage of a Multi Asset Fund is the diversification it offers. By investing in various asset classes, these funds can reduce the risk associated with focusing on a single asset class.

Other advantages of investing in Multi-Asset Funds are:

  1. Balanced Risk-Reward Ratio: Due to the mix of asset classes, these funds can maintain a balanced risk-reward ratio, offering stable returns during different market cycles.
  2. Professional Management: The fund is managed by a professional fund manager who makes informed decisions on asset allocation based on market conditions.
  3. Convenience: Multi Asset Funds provide a convenient investment option for those who wish to invest in various asset classes but lack the time or expertise to manage multiple investments.
  4. Flexibility: The fund manager can change the allocation to different asset classes based on their market perception, ensuring optimal returns.
  5. Cost-Effective: Investing in a Multi Asset Fund can be more cost-effective than investing in individual funds of different asset classes as it involves fewer transaction costs and lower management fees.

Multi Asset Allocation Fund Taxation

Taxation on Multi Asset Allocation Funds in India depends on the proportion of the fund invested in equity. If the equity investment is more than 65%, it is treated as an equity fund for taxation. Otherwise, it is taxed as a debt fund. 

Here are the taxation rules for both scenarios:

Equity Funds (equity allocation over 65%):

  • Short-term capital gains (held for less than one year) are taxed at 15%.
  • Long-term capital gains above ₹1 lakh (held for over a year) are taxed at 10%. Gains up to ₹1 lakh per financial year are exempt.

Debt Funds (equity allocation less than 65%):

  • Short-term capital gains (held for less than three years) are added to your income and taxed as per your income slab.
  • Long-term capital gains (held for over three years) are taxed at 20% after indexation.

For example, if you invest ₹1,00,000 in a Multi Asset Allocation Fund treated as an equity fund for taxation and sell your investment after one year for ₹1,20,000, your long-term capital gain is ₹20,000. Since this amount is below the ₹1 lakh exemption limit, you will not have to pay any tax on it.

Top 10 Multi Asset Funds India

Here are the top 10 Multi-Asset Funds in India, based on their performance, risk-adjusted returns, and other factors. Please note the order does not indicate rankings.

Fund Name1 year return3 year returns
ICICI Prudential Multi-Asset Fund24.26%27.26%
SBI Multi Asset Allocation Fund19.47%13.87%
HDFC Multi-Asset Fund17.03%18.78%
Kotak Multi Asset Allocation Fund29.25%23.43%
Axis Multi Asset Allocation Fund14.21%16.49%
Quant Multi Asset Fund24.91%37.22%
UTI Multi-Asset Fund25.51%15.02%

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Multi Asset Allocation Fund – Quick Summary

  • Multi Asset Allocation Fund is a type of mutual fund that invests in various asset classes, such as equity, debt, gold, etc., with the goal of optimizing risk and returns.
  • These funds offer diversification and aim to mitigate the volatility of a single asset class. They adjust the allocation based on market conditions and investment strategy.
  • Investing in Multi Asset Funds brings several advantages like diversification, potential for better risk-adjusted returns, flexibility to switch between asset classes and automatic rebalancing.
  • The taxation of Multi Asset Funds in India depends on equity allocation. If the equity portion is over 65%, it’s treated as an equity fund; otherwise, it’s considered a debt fund for taxation purposes.
  • Some of the top-performing Multi Asset Funds in India include ICICI Prudential Multi-Asset Fund, SBI Multi Asset Allocation Fund, HDFC Multi-Asset Fund, among others.
  • Invest in top multi asset funds with Aliceblue. They are offering a user friendly direct platform at no cost.

Multi Asset Fund- FAQs

1. What are multi asset allocation funds?

Multi asset allocation funds are a type of mutual fund that invests in multiple asset classes. This could include a mix of equity, debt, commodities like gold, and sometimes even international assets. 

2. What is the tax on multi asset funds?

Taxation on Multi Asset Funds depends on the proportion of equity investments. If equity is over 65%, it’s taxed as an equity fund. Short-term gains are taxed at 15%, while long-term gains above ₹1 lakh are taxed at 10%. If equity is less than 65%, it’s taxed as a debt fund. Short-term gains are added to income and taxed per your income slab, while long-term gains are taxed at 20% after indexation.

3. Are multi asset funds risky?

The risk in multi-asset funds varies based on their asset allocation. These funds aim to diversify risk by investing in multiple asset classes. However, the risk is not entirely eliminated and depends on market dynamics, the fund’s investment strategy, and asset distribution.

4. What are the best multi asset funds?

Here are some of the top-performing multi-asset funds in India:

Fund Name1 year return3 year returns
ICICI Prudential Multi-Asset Fund24.26%27.26%
SBI Multi Asset Allocation Fund19.47%13.87%
HDFC Multi-Asset Fund17.03%18.78%

5. What are the benefits of investing in multi asset funds?

Investing in multi asset funds provides several benefits:

  • Diversification
  • Flexibility
  • Balanced Risk-Return Profile

6. Who should invest in multi asset fund?

Investors looking for diversification across asset classes in a single investment should consider investing in multi-asset funds. These funds are especially suitable for risk-averse investors who aim for a balanced portfolio. 

Important Note– Before choosing a mutual fund scheme, you should always consider how much risk you will take and what you want to get out of your investments. Getting advice from a financial advisor can help you make a good investment decision.

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