How can Multi Asset Allocation Funds provide stability in your portfolio?

Current Market Context

Financial markets are going through an interesting phase. The equity market has made a smart recovery riding tailwinds provided by GST reforms and Fed rate cuts. However, there are concerns about valuations relative to other emerging markets. Gold continues to be strong due to global uncertainties and central bank gold purchases. In the debt market yields have stiffened. Investors may feel confused in current market conditions. Asset allocation can balance risk / returns in different market conditions and provide stability to your portfolio.

What is multi asset allocation?

Traditional asset allocation refers to diversifying your portfolio with allocations to equity and debt based on your risk appetite. However, inclusion other asset classes e.g., commodities (gold, silver), international equities etc, can provide richer diversification to your investment portfolio. Multi asset allocation funds provide the benefit of three or more asset classes in a single product. As per SEBI's mandate multi asset allocation funds must have minimum 10% exposure in each asset class, with at least 3 or more asset classes in the underlying portfolio of the scheme.

Benefits of multi asset allocation strategy

• Winners rotate across asset classes (see the chart below). It is difficult to predict the best performing asset class at any point of time. Exposure to multiple asset classes may bring more consistency to your portfolio performance across market conditions or investment cycles.
  
  

  

  Source: Advisorkhoj Research, NSE, MCX, Bloomberg. Equity is represented by Nifty 50 TRI, Debt by Nifty 10 year Benchmark G-Sec Index, Gold by MCX spot prices and International by S&P 500 in INR. As of 31^st August 2025



• Traditionally gold has been thought of as a safe haven asset that can provide security in uncertain times. However, based on historical data, both equity and gold have created wealth for investors over long investment horizons.
  
  

  

  Source: Advisorkhoj Research, NSE, MCX. Equity is represented by Nifty 50 TRI and Gold by MCX spot prices. Period: 1^st January 2005 to 31^st August 2025.



• Equity can have larger drawdowns in the short term compared to other asset classes (see marked in red in the table below). Debt is least volatile. Equity and gold can give similar returns over the medium term. However, for long investment tenures, equity has the potential to outperform gold (see marked in green).
  
  

  

  Source: Advisorkhoj Research, NSE, MCX. Equity is represented by Nifty 50 TRI, Debt by Nifty 10 year Benchmark G-Sec Index and Gold by MCX spot prices. Period: 1^st January 2005 to 31^st August 2025.



• While equity may have deeper drawdowns than other asset classes in the short term, gold may underperform for a longer period of time compared to other asset classes (see marked in red in the table below). Over long investment tenures, equity has the potential to give superior returns compared to other asset classes (see marked in green).
  
  

  

  Source: Advisorkhoj Research, NSE, MCX. Equity is represented by Nifty 50 TRI, Debt by Nifty 10 year Benchmark G-Sec Index and Gold by MCX spot prices. Period: 1^st January 2005 to 31^st August 2025.



• Equity and gold are usually counter-cyclical i.e., gold outperforms when equity underperforms and vice versa. Therefore, asset allocation to equity and gold will bring more stability to your investment portfolio.
  
  

  

  Source: Advisorkhoj Research, NSE, MCX. Equity is represented by Nifty 50 TRI, Debt by Nifty 10 year Benchmark G-Sec Index and Gold by MCX spot prices. Period: 1^st January 2005 to 31^st August 2025.

How has multi asset allocation strategy performed?

• We have constructed a hypothetical multi asset portfolio comprising of 65% allocation to equity, 20% allocation to debt and 15% allocation to gold, rebalanced monthly. The wealth creation in the hypothetical multi asset strategy was similar to equity .
  
  

  

  Source: Advisorkhoj Research, NSE, MCX. Equity is represented by Nifty 50 TRI and Multi Asset Allocation portfolio is 65% Nifty 50 TRI + 20% Nifty 10 year Benchmark G-Sex Index + 15% Gold (MCX Spot Prices). Period: 1^st January 2015 to 31^st August 2025.



• While the wealth creation of the hypothetical multi asset allocation strategy was similar to equity (tad lower), multi asset allocation strategy was able to limit downside risks for investors to a significant extent (see the chart below).
  
  

  

  Source: Advisorkhoj Research, NSE, MCX. Equity is represented by Nifty 50 TRI and Multi Asset Allocation portfolio is 65% Nifty 50 TRI + 20% Nifty 10 year Benchmark G-Sex Index + 15% Gold (MCX Spot Prices). Period: 1^st January 2015 to 31^st August 2025.



• Across different market conditions and investment tenures, the multi asset allocation strategy can give equity-like returns (see marked in green in the table below). However, the downside risk multi asset allocation strategy is much lower than equity (see marked in red). In other words, Multi asset allocation can offer superior risk return trade off to investors.
  
  

  

  Source: Advisorkhoj Research, NSE, MCX. Equity is represented by Nifty 50 TRI and Multi Asset Allocation portfolio is 65% Nifty 50 TRI + 20% Nifty 10 year Benchmark G-Sex Index + 15% Gold (MCX Spot Prices). Period: 1^st January 2015 to 31^st August 2025.

Who can invest in Multi Asset Allocation Funds?

• Investors looking for a long-term strategic allocation to different asset classes


• Investors looking for relatively stable returns with low downside risks


• Investors with moderate to high risk appetites


• Investors with long investment tenures. We recommend minimum 3 years investment tenures for multi asset allocation funds.

Investors should consult with their financial advisors or mutual fund distributors if multi asset allocation funds are suitable for their investment needs.