Multi-asset funds: Multi-asset funds have multiple attractions, capital inflows double

Mumbai: elevated stock valuations, tax efficiencyand automatic allocation to a diverse set of assets are attracting investors to multi-asset funds. Data from the Association of Mutual Funds of India (AMFI) showed that assets under management of these funds rose to Rs 1.02 lakh crore in September 2024, from Rs 40,000 crore a year ago. “Over the last year, both gold and silver have performed well. Multi-asset funds take exposure to gold and silver, along with other assets, and offer better tax efficiency. That is attracting investors,” said Amar Ranu, head of investment analysis at Anand Rathi Share and Stock Brokers.

A sector of wealth managers points out that there has been rapid growth in the mutual fund industrywith 9.7 million new investors in the last 12 months. As equity valuations are no longer cheap and many first-time investors abandon bank deposits, the need for low-volatility products has multiplied.

“Equity valuations are expensive. Conservative investors looking for inflation-beating returns with low volatility and tax efficiency are using multi-asset funds,” said Vineet Nanda, founder of Sift Capital. Nanda said these plans work well for those moving away from the DF for the first time.

Multi-asset funds are allocated to different asset classes, be it equities, debt, gold, silver, REITs and international equities. Many investors like this as it helps them gain exposure to different asset classes through a single product. It usually helps investors who cannot afford the services of a financial planner by helping them maintain their asset allocationand since it has a defined allocation for each asset class, it helps in auto asset allocation.

ICICI Prudential Mutual Fund Multi-Asset Schemes, Aditya Birla Sun Life MF, HDFC MFKotak MF and SBI MF are popular because they offer capital tax (12.5% ​​for holdings of more than one year). In such schemes, the equity plus arbitrage allocation is a minimum of 65%, with the remainder allocated across debt, gold, REITs and international equities.

WhiteOak Capital, Nippon and DSP multi-asset funds allocate between 35% and 65% to equity. Investors in these plans will have to pay capital gains tax of 12.5% ​​after holding for two years. The estate tax treatment means investors only need to pay a 12.5% ​​capital gains tax if they hold for more than a year.