Multi-Asset Funds: Better Investment Experience

Multi-asset allocation invests in different asset classes in different proportions to provide a well-diversified portfolio to the investors. In this article, you would gain more insights about this category and also understand what kind of investor should consider investing in them.

The incessant fall in the equity market in the first quarter of 2020 has spared no one. Hybrid funds, which are considered less volatile as a category, too saw a negative impact due to the virus pandemic. Apart from arbitrage funds, which on an average stand to gain 2.27 per cent year-till-date (YTD), all other sub-categories among hybrid funds are staring at negative returns. Among hybrid funds, aggressive hybrid and balanced hybrid are the ones that faced the maximum loss of 17.70 per cent and 15.36 per cent respectively on a YTD basis. This was followed by multi-asset allocation funds, which on a YTD basis are down by 12 per cent.

This underperformance was led by the equity part of the portfolio that nose-dived. However, despite all the advantages that a multi-asset allocation strategy carries, its performance seems to be quite disappointing. As we can see from the graph alongside, arbitrage funds have performed better than any other fund in this category in the entire timeframe. If we look at multi-asset allocation funds, they have consistently done poorly in all timeframes. So, this raises a quite obvious question about whether or not to invest in a multi-asset allocation fund. But getting deep into this issue, let us first understand the fundamentals of a multi-asset allocation strategy and how it works.

Defining Multi-Asset Allocation Funds