Multi-asset funds march to the hybrid throne; gold their banner

Inflows signal a changing guard from BAFs, though analysts caution investors against recency bias

The prolonged rally in gold and silver amid turbulence in the equity market has allowed multi-asset allocation funds (MAAFs) to outshine other hybrid mutual fund (MF) offerings in terms of returns and cement their position as the ‘one-stop’ or ‘all-weather’ MF schemes.

 

The inflow pattern over the past two years suggests a shift in investor preference away from the largest hybrid category, balanced advantage funds (BAFs), and towards MAAFs.

 

The multi-asset offerings, which have led almost all key MF scheme segments in near-term returns for some time, have recorded higher inflows than BAFs for 12 consecutive months. In the past two years, MAAFs have recorded lower monthly inflows than BAFs on only two occasions.

 

The rise in investor interest, especially over the past year, has been driven by comparatively stronger performance versus equity, debt, and other hybrid offerings.

 

In the past year, MAAFs have delivered an average return of 7.3 per cent, the highest among all hybrid categories. They have also outperformed major equity indices in the short to medium term. Over the three years, MAAFs have generated nearly 17 per cent annualised returns, compared with roughly 13 per cent for the National Stock Exchange Nifty 50.

 

One reason, according to experts, is their substantial exposure to gold and silver, which have risen as much as 43 per cent in the past year. Most schemes maintain a 10–20 per cent commodity allocation.

 

“MAAFs have benefited from a strong rally in at least two asset classes — gold and debt — and in certain cases from the rally in international equities as well,” said Vishal Dhawan, founder and chief executive officer of Plan Ahead Wealth Advisors.

 

Ramesh Mantri, chief investment officer of WhiteOak Capital MF, said that while the gold rally provided an advantage, careful selection of stocks and debt instruments, along with exposure to real estate investment trusts and infrastructure investment trusts, was key to WhiteOak MAAF’s strong performance over the one year.

 

However, experts said investors must avoid falling for recency bias.

 

According to Dhawan and Mantri, BAFs may be a better option currently, given that the precious metal advantage is unlikely to continue. “With gold unlikely to repeat its recent performance and interest rates unlikely to fall rapidly from current levels, it may be difficult to replicate the past year’s returns,” Dhawan said.

 

“Gold has already seen a sharp run-up, while the equity market has not moved much in the past year. Bonds have also corrected recently. Considering how the three asset classes are positioned now, BAFs may be a better fit for investors with a medium-term horizon,” Mantri said.

 

The outperformance is attracting strong inflows into MAAFs. They have recorded net inflows of over ₹37,000 crore during the August 2024 to July 2025 period. BAFs, in comparison, received just ₹19,600 crore. In July 2025, investments into MAAFs (excluding new fund offering collections) reached a record ₹4,338 crore.

 

The last time the equity market witnessed sustained volatility, in 2021, BAFs had emerged as the preferred choice.

 

While MAAFs — with mandates to invest across equity, debt, and commodities — have been around for more than a decade, they began gaining wider investor attention only after the debt fund tax change in March 2023. The resultant demand for debt fund alternatives and tax-efficient ‘one-stop’ funds encouraged a wave of launches in the category.

 

The rise in popularity after March 2023 has lifted assets under management of MAAFs from ₹26,600 crore to ₹1.3 trillion in under two and a half years.