Are multi-asset funds a good option amid the market rally?

MAAFs are structured to invest in a mix of asset classes, offering diversification benefits

- Anil Poste

After correcting nearly 11% from their all-time highs, Indian indices are again witnessing a rally, making investors reassess the best course of action.

With overheated markets, the challenge of balancing risk and returns has become more pronounced. For those seeking stability and inflation-beating growth, multi-asset allocation funds (MAAFs) may be a viable alternative to debt mutual funds or fixed deposits (FDs).

MAAFs are structured to invest in a mix of asset classes—commonly equities, debt, and gold—offering diversification benefits. As per Securities and Exchange Board of India (Sebi) regulations, these funds must allocate at least 10% of their portfolio to three asset classes, making them less volatile than pure equity funds.

According to Ventura Securities, the popularity of MAAFs has surged in recent years. The assets under management (AUM) for these funds grew from ₹17,908 crore in August 2021 to ₹198,283 crore in August 2024. The number of funds in this category has increased from 9 to 24 over the same period.

"MAAFs are ideal for investors who are looking to restrict the risk and at the same time generate returns with reasonable allocation in equity as well. The funds focusing on the right asset class allocation are much better to invest as they constantly keep an eye on the portfolio asset allocation based on market conditions and other factors," said Harshad Chetanwala, co-founder of MyWealth Growth.com.

Aggressive and conservative MAAFs