While SEBI regulations require multi-asset funds to hold at least three asset classes, the actual portfolio mix changes drastically between schemes. Some funds are equity-heavy, while others rely on gold or debt for stability. Investors should look past headline returns and check the specific underlying assets to ensure the fund truly matches their personal risk appetite.
Multi-asset allocation mutual funds share a common regulatory goal, but they operate with vastly different investment styles. Under Securities and Exchange Board of India (SEBI) guidelines, these funds must invest in at least three different asset classes, with a minimum of 10 percent allocated to each. However, once that basic requirement is met, fund managers have wide freedom in how they distribute the remaining money. This discretion means that two funds with the same label can behave very differently during market changes.
Comparing Equity-Heavy and Defensive Strategies
At one end of the spectrum are funds that remain aggressive by focusing heavily on the stock market. For example, recent data shows that schemes like the Quant Multi Asset Allocation Fund and the Bandhan Multi Asset Allocation Fund have allocated over 60 percent of their portfolios to domestic equities. To handle the risks that come with holding so many stocks, these managers often use equity-futures hedges, which are financial tools designed to lower the impact of a market drop. This means that while their raw equity holding is high, their actual exposure to market movement is often lower than it appears on paper.
In contrast, other managers prefer to build defensive portfolios using alternative assets. The 360 ONE Multi Asset Allocation Fund, for instance, has utilized a significant portion of its capital for precious metals like gold and silver. Such an allocation is intended to act as a buffer against volatility in traditional stock markets. Similarly, WhiteOak Capital has directed a portion of its portfolio toward Real Estate Investment Trusts and Infrastructure Investment Trusts. These instruments, which pool money to own income-generating properties or infrastructure, provide different return characteristics than standard stocks or government bonds.
The Role of Debt for Stability
For investors seeking a more conservative approach, some funds prioritize capital preservation over high returns. The Edelweiss Multi Asset Allocation Fund is an example of this approach, with over 50 percent of its portfolio tied to debt instruments like corporate bonds. By limiting its equity exposure to a smaller portion—around 25 percent—and excluding high-risk small-cap stocks, the fund creates a risk profile that is fundamentally different from equity-heavy peers.
Why Investors Should Monitor Underlying Assets
For an investor, simply looking at the total return of a fund can be misleading. A high return in a volatile year might be the result of a heavy bet on equities, which could lead to steeper losses if the market turns. Conversely, a lower return might reflect a stable, debt-heavy portfolio that is designed to protect capital rather than grow it rapidly.
To make an informed decision, investors should regularly check the fund’s monthly fact sheet available on the fund house website. This document lists the exact weightage of stocks, bonds, gold, and other instruments. Understanding whether the fund is betting on equities, gold, or debt is crucial to knowing if the scheme still fits one's financial goals, especially when market conditions change.