Union Multi Asset Allocation Fund: Triple benefit of diversification, stability and tax efficiency

Current market scenario

The Nifty has seen profit booking after making record high. The market is facing headwinds from continued FII selling, INR depreciation and uncertainty about Indo US trade talks. Even the broader market is facing headwinds, with Nifty Midcap 150 and Nifty Small cap 250 correcting by 1.9% and 2.7% in the last one week (as on 10^th December 2025, source: NSE). 10 year Government bond yields have been in a narrow range for the past few months. Though bond prices rose / yields fell after RBI cut repo rate by 25 bps in December, the 10 year bond yield surged to 6.63% on profit booking and fears that the interest rate cycle is coming to an end. Even the 1 year bond yield rose by 13 bps to around 5.55% (as on 10^th December 2025, source: Bloomberg). The spectacular precious metals rally is continuing with gold prices rallying by 70% in CY 2025 (as on 10^th December 2025, source: MCX). In the current market scenario, with concerns about geo-political risks, falling INR, valuations and precious metals at all time highs, a multi-asset allocation strategy be suitable for investors with medium to long term investment horizon.

Why multi-asset allocation fund?

• Winner rotate across classes: Recency bias attracts investors to asset classes that are currently outperforming. However, historical data shows that winners have rotated across asset classes. In the last 15 years, equity was the top performer in 6 years, debt was in the top performer in 2 years, and gold was the top performer in 7 years.
  
  

  

  Source: NSE, Advisorkhoj Research, as on 10^th December 2025. Equity is represented by Nifty 50 TRI, Debt by Nifty 10 year Benchmark G-Sec Index and Gold by MCX spot prices.



• Gold and equity are often counter cyclical: Traditional asset allocation models rebalance between debt and equity. However, multi asset allocation has the potential of increasing performance consistency of your portfolio since gold and equity are counter-cyclical i.e. gold tends to outperform when equity underperforms and vice versa (see the chart below).
  
  

  

  Source: Advisorkhoj Research, as on 30^th November 2025



• No tax event for investor during portfolio rebalancing: If you were rebalancing your portfolio between equity and debt funds, tax events may be triggered due to potential capital gains when you redeemed and reinvested. Multi asset allocation fund provides the benefit of automatic rebalancing with no tax event for the investor.
  
  

  In this article we will review Union Multi Asset Allocation Fund. The fund was launched in September 2024 and has outperformed the equity broad market index Nifty 50 TRI (see the chart below).

  
  
  

  

  Source: Advisorkhoj Research, as on 10^th December 2025

Limited downside risk for investors

The chart below shows the drawdown of Union Multi Asset Allocation Fund versus Nifty 50 TRI since the inception of the scheme. You can see that during this volatile period for equity market Union Multi Asset Allocation Fund was able to limit downside risks and provide stability to investor’s portfolios.

Source: Advisorkhoj Research, as on 10^th December 2025

Asset Allocation

Source: Union MF

Investment strategy

Equity

• Top down - The top down approach shall involve analysis of the macro-economic factors, industry evaluation, benchmark industry allocation, market outlook etc. It shall be used to determine the asset allocation.


• Bottom up - Bottom up approach to help identifying individual companies to create a portfolio of carefully selected stocks, offering attractive potential growth opportunities.

Fixed Income

• Selection of debt securities will be guided by credit quality, liquidity, interest rates and their outlook.


• Duration to be managed dynamically based on the fund manager’s view and guidance by the market

Commodity ETFs

• Investments in units of Gold and / or Silver ETFs to provide risk diversification from Equity and Debt. This will be regularly tracked and rebalanced.

REITs / INVITs

• The Fund Manager has the discretion to invest in units of REITs and InvITs as and when favourable opportunity is present.

Taxation

Since Union Multi Asset Allocation Fund has minimum 65% allocation of equity (including hedging), the fund enjoys equity taxation. Short term capital gains (holding period of less than 12 months) are taxed at 20%. Long term capital gains (holding period of more than 12 months) of up to Rs 1.5 lakhs are tax exempt and taxed at 12.5% thereafter.

Current portfolio positioning

Source: Union MF, as on 30^th November 2025

Who can find Union Multi Asset Allocation Fund suitable?

• Investors seeking stability and reasonable returns across different market conditions


• Investors who want to diversify across three or more asset classes in a single fund


• Investors who want to add gold to their asset allocation


• Investors with medium to long term investment horizons, 3 – 5 years plus

Investors should consult with their financial advisors or mutual fund distributors if Union Multi Asset Allocation Fund is suitable for their investment needs.