Multi-asset funds are a suitable bet for risk-averse investors to stay away form market volatility
INVESTING in a multi-asset fund is more like throwing a dart on the board. One would never be able to guess which asset class will generate returns and which will fail to make the cut. This, perhaps, is one reason why multi-asset funds are seeing inflows, despite equities and gold not doing well over the past few months.
THE STRUCTURE:
The term 'multi-asset funds' refers to funds that invest across several asset classes that means investors are not exposed to the market gains or losses of just one asset class. Fund managers allocate portions of the collected pool — in different ratios or equally — to three main asset classes — equities, debt and gold. In a way, multiasset managers create the potential for capital growth and conditions where the better performers may offset the poor performers. The desire of investors to spread investment risk, coupled with three different asset classes performing simultaneously, have been touted as some of the reasons for the increased focus on diversified strategies.
In our case, we make onethird allocation to gold, equities and debt and wait for the market to take a call. If two of the three sectors perform, we'll make money for investors.
FUNDS:
Canara Robeco Mutual Fund, Kotak Asset Management and Axis Mutual Fund are money managers that are offering multi-asset funds in India. Canara Robeco Indigo Fund invests a minimum of 65% (max 90%) in Indian debt and a minimum of 10% (max 35%) in gold ETFs. Kotak Multi Asset Allocation Fund aims to invest 75-90% in debt, 5-20% in equity and 5-20% in gold. Axis Triple Advantage Fund invests 33% each in equities, debt and gold. Apart from these, Religare MIP and Taurus MIP Advantage also provide exposure to three asset classes.
The fall of the equity market over the past one month has amplified the importance of multiasset funds in investor portfolios. Higher yields on fixed income instruments and the noncorrelated nature of gold to other asset classes make these multiasset funds appropriate for riskaverse investors, fund managers managing these funds said.
ASSET OUTLOOK:
Indian shares have fallen over 13% since January this year. Analysts expect the market to fall by another 7% to find floor-levels at about 16,500 on the Sensex. The "spike factor" in market, according to stock researchers, will come from IT, oil & gas and infrastructure sectors. The 2% fall in prices has not stripped the merit of gold as an asset class for bad market conditions. The yellow metal has shed 550 from price-highs attained in December and is currently trading at 20,230 per 10 grams. Rising inflation in emerging markets, gold-stocking by major central banks, low gold supply and underperformance of other asset classes will keep gold prices firm.
THE BOTTOMLINE:
Multi-asset funds are for investors who are averse to market volatility. Fund marketers are targeting fixed deposit investors to invest in multi-asset funds. The genre of fund is not appropriate for investors who can take some risk on their portfolios. Multi-asset funds will underperform diversified funds in times of firm equities markets.
