Sundaram Mutual Fund prioritises equity, gold in multi-asset offering

Sundaram Mutual Fund (MF) has launched a differentiated offering in the multi-asset category. The scheme will follow a set asset allocation structure, wherein 90 per cent of the portfolio will be invested in equities 

(65 per cent) and gold (25 per cent) at all times barring a few instances when the fund house will deploy the arbitrage strategy to reduce net equity allocation. The scheme will invest a bare minimum of 10 per cent in debt. Regul­ations mandate multi-asset funds to invest a minimum of 10 per cent in each of equity, debt and commodity, leaving the rest of the allocation in the hands of the fund manager. However, to qualify for the preferred equity taxation, minimum 65 per cent investment in equity is mandatory.

According to Sundaram MF, its scheme will stick to the planned allocation and will not tweak the allocation regularly based on market condition. The fund has chosen to invest more into gold at the expense of debt considering its low or negative correlation with equity, Sundaram MF said.

"Gold and Equity thus show low or negative correlation, rendering these two asset classes as an ideal blend that can deliver superior risk adjusted returns to the combined portfolio," the fund house stated.

Multi-asset allocation funds have been the 'flavour of the season' in the hybrid space in financial year 2024 as fund houses have rushed to launch the product post the change in debt fund taxation. However,  fund houses have taken a diverse approach, especially on the taxation front. While some fund houses have stuck to the usual equity taxation structure, others have opted for the erstwhile debt taxation (20 per cent tax with indexation benefits after 3 years).

The funds also differ from asset allocation point of view.  

Multi-asset funds were a silver-lining for fund houses in the hybrid space in 2023. The folio count of the category surged 68 per cent to 1.5 million in the January-November period even as the overall hybrid space registered the slowest folio growth in the past three years at 5.7 per cent.