Multi-asset funds hit afterburners: AUM growth reaches critical mass

Inflows and fund launches reshape asset landscape

Multi-asset allocation funds, which gained traction following the shift in debt fund taxation in April 2023, continued their upward trajectory in 2024, with assets under management (AUM) nearly doubling during the year.

 

This asset growth was driven by strong inflows and a series of new fund launches. AUM, which stood at Rs 52,869 crore at the beginning of the year, topped Rs 1 trillion for the first time in November 2024.

 

Multi-asset funds allocate their investments across equity, debt, commodities (gold and silver exchange-traded funds), and units of real estate investment trusts and infrastructure investment trusts. Many also use derivatives to hedge against market fluctuations.

 

The product’s tax efficiency is a key attraction, as most offerings maintain a minimum 65 per cent gross equity exposure to qualify for equity taxation. In contrast, investors who allocate assets through separate funds may face higher tax liabilities, as gains from debt funds are taxed at the investor’s slab rate.

 

In 2024, multi-asset funds attracted a net inflow of Rs 42,569 crore. These inflows were supported by a raft of new fund launches. The number of funds in this category grew from 16 at the start of the year to 27 by year-end.

 

The industry expects further growth for this offering, particularly if equity market volatility persists.