Top multi-asset funds to invest in: Ventura highlights best performers

An analysis of 25 multi-asset funds reveals that they have outperformed the majority of general equity schemes in one, three- and five-years span.

A recent analysis by Ventura Securities has highlighted the growing appeal of Multi-Asset Allocation Funds, with findings showing that these funds have outperformed the majority of traditional equity schemes over one, three, and five-year periods.  

 

The report said 25 multi-asset funds that were analyzed have demonstrated the ability to deliver competitive returns across diverse asset classes, positioning them as attractive alternatives to single-asset equity funds, especially in the current market environment. 

 

"The allocation strategies that exist across 25 multi-asset allocation funds show a huge variation, heavy on equity and debt along with a mix of gold and silver, arbitrage and other alternative assets. This diversity underscores the fact that "one size does not fit all" as each fund follows a distinct strategy tailored to different market conditions and investor objectives," noted the report. 

 

 

Noteworthy Performers: Quant AMC and ICICI Prudential Lead the Pack

 

Among the standout performers, Quant AMC's Multi Asset Fund has outperformed approximately 79% of equity schemes based on three-year returns and 86% over a five-year period. Its allocation strategy, despite a controlled equity exposure of less than 51%, has proven successful in surpassing the returns of numerous equity funds. 

 

Similarly, ICICI Prudential Multi Asset Fund has surpassed 63% of equity schemes' returns over a three-year period and nearly 50% over five years. The fund’s well-balanced approach to asset allocation, combining equity, debt, and gold, has enabled it to deliver solid performance in a variety of market conditions.

 

A Diverse Range of Allocation Strategies 

 

Some funds have outperformed large-cap funds by delivering higher returns with lower associated risk.

 

WhiteOak delivered solid returns with minimal risk, showcasing a risk-reward ratio of 16.6 compared to the large cap’s 2.8. Its diversified asset mix - spanning Gold, Equity, Debt, REITs, and INVITs- effectively spread risk.

 

Quant has a slightly lower risk-reward ratio of 16.4, closely matching WhiteOak. However, it carries higher risk due to its greater equity allocation, though it maintains a diversified portfolio.

 

DSP and Shriram, with low risk-reward ratios of 7.3 and 7.0, respectively, deliver decent returns but entail relatively high risk. This highlights that some funds are more effective at optimizing returns for each unit of risk taken.

 

Understanding the Risk-Reward Balance

 

The report also delves into the different classifications of multi-asset funds—Conservative, Moderate, and Aggressive—based on their equity exposure. Conservative funds, such as those from Edelweiss and WhiteOak, have less than 35% equity exposure and are ideal for risk-averse investors.

 

 Meanwhile, moderately aggressive funds like DSP, UTI, and HDFC offer a balanced approach, with a mix of equity and debt, making them suitable for those with a moderate risk appetite.

 

Aggressive funds, such as those from Bajaj Finserv, Shriram, and Motilal Oswal, invest more than 65% in equities, making them more suitable for investors seeking higher growth, albeit with greater risk.

 

Multi-asset funds also present an excellent opportunity for long-term financial planning, particularly for retirement as diversification within these funds can offer not only attractive returns but also the stability needed for retirement planning, noted the report.

 

Consider an example: if an investor aged 55 invests a lump sum of Rs 62 lakh at a 10% annual return, their corpus would grow to Rs 1 crore in five years. By age 60, they could begin a Systematic Withdrawal Plan (SWP) of Rs. 50,000 per month, adjusting for inflation annually. Over 25 years, they would still retain a corpus of Rs 50 lakh, highlighting how multi-asset funds can help safeguard and grow wealth in retirement while mitigating the impact of inflation.  “Some Multi Asset Allocation Funds have outperformed most equity schemes, and all of this underlines the potential benefits of these funds. Ventura Securities' analysis of multi-asset funds underscores their potential benefits, including robust returns. These funds offer attractive options for investors seeking balanced risk-reward profiles. However, the varied performance emphasizes the importance of selecting funds aligned with individual investor objectives and risk tolerance, reinforcing the notion that "one size does not fit all" in multi-asset allocation,” said Juzer Gabajiwala - Director - Ventura Securities Ltd.