Flexible and debt-heavy multi-asset funds brave market correction

Schemes with downside protection strategies shine

Fund houses that adopted a differentiated approach in the multi-asset allocation fund (MAAF) category are reaping the benefits during the ongoing equity market correction. While most MAAFs launched in the past two years followed an equity-heavy strategy, a handful of fund houses — WhiteOak Capital, Edelweiss, DSP, Quantum, and Mahindra Manulife — opted for a more flexible, debt-oriented approach. Nippon India MAAF, launched in 2020, also stands out with its unique fund structure.

 

These schemes are among the few in the category to deliver positive returns over the past year for both systematic investment plan (SIP) and lump sum investors. Some fund-of-funds multi-asset solutions from Franklin India, ICICI Prudential, and Motilal Oswal have also emerged as top performers during this period.

 

Data from Value Research shows that the regular plans of Edelweiss and WhiteOak MAAFs have delivered SIP returns of around 7.5 per cent over the past year, significantly outperforming the category average return of minus 5.8 per cent. However, many of these schemes are relatively new and lack a long-term track record.

 

Experts emphasise that selecting a MAAF should align with an investor’s risk appetite and financial goals rather than being driven solely by recent performance.

 

“The multi-asset category offers a wide range of products tailored to different investor needs. Those with a higher risk tolerance and a longer investment horizon may prefer equity-oriented schemes, while conservative investors with shorter time frames might opt for debt-heavy funds,” said Vishal Dhawan, founder and chief executive officer of PlanAhead Wealth Advisors.

 

While Edelweiss and Quantum operate their MAAFs as debt-oriented funds, WhiteOak, DSP, Nippon, and Mahindra Manulife are considered more ‘true-to-label’ MAAFs, offering greater flexibility to allocate across equity, debt, and commodities. 

 

MAAFs are hybrid products that allow fund managers to dynamically allocate across asset classes based on market conditions. However, the allocation is influenced by the fund’s tax structure — equity or hybrid. For equity taxation, a minimum of 65 per cent gross equity allocation is required, while hybrid schemes must maintain at least 35 per cent equity exposure. Both structures qualify for long-term capital gains taxation, but the holding period differs: one year for equity schemes and two years for hybrid schemes.

 

Fund managers and experts highlight that MAAFs with higher flexibility have gained an edge in recent months due to their ability to allocate a larger portion of the corpus to gold, silver, and debt instruments.

 

“Our fund is designed to be ‘true to label’. Over the past year, timely asset allocation, strong equity portfolio performance, and higher exposure to gold have driven returns. Additionally, investments in real estate investment trusts, infrastructure investment trusts, and arbitrage strategies have contributed to the fund’s success,” said Ramesh Mantri, chief investment officer of WhiteOak Capital Asset Management Company.

 

DSP Mutual Fund (MF) attributes its fund’s performance to allocations in gold and foreign equities.

 

“Our fund’s structure allows greater flexibility to invest in precious metals and foreign equities. This has helped limit downside risks in recent months, with around 15 per cent of the corpus allocated to these asset classes,” said Aparna Karnik, head of quantitative investments and analytics at DSP MF.

 

Edelweiss MF has a set allocation structure and no unhedged exposure to equities and commodities.

 

“The fund allocated 45–55 per cent to fixed income securities, while the rest is invested in equity, gold, and silver through arbitrage. It does not have any open exposure to equity or gold and silver,” said Niranjan Avasthi, senior vice-president and head — product, marketing, and digital business at Edelweiss MF.

 

In contrast, equity-oriented MAAFs are constrained by the 65 per cent gross equity allocation requirement, leaving only 35 per cent of the corpus for investments in gold and debt.