Multi-asset funds are in vogue these days. Riding on the back of the spectacular performance of gold in the past few years, eight mutual fund houses have come out with schemes that will invest in gold along with other asset classes. Quantum AMC too has come out with Quantum Multi Asset Fund in June 2012. Morgan Stanley Multi Asset Plan, launched in January this year, has declared its maiden dividend last fortnight. But as fund houses come out with multiple combinations of equity, debt and gold, the choice becomes difficult for investors. To avoid confusion, first clearly define your financial goals and then understand the investment objective of the scheme. Your goals and scheme objective must match, otherwise the schemes need not deliver as per your expectations.


There are primarily three types of funds.

The first type of funds comprises financial planning schemes. Let's take the case of ING Financial Planning Fund. These are schemes that invest in equity, gold and debt directly, or the units of mutual fund schemes investing in these asset classes in a pre-determined proportion, depending on the risk appetite of the individual. For example in ING Financial Planning Fund – Aggressive Plan, the fund manager can invest 63-77% of the portfolio in equity funds, 4.25-14.5% in gold exchange traded funds (ETFs) and the rest in money market securities, liquid funds and other debt funds. You can choose between options such as aggressive, prudent or conservative, depending on your risk profile.

The second type of funds is multi-asset funds with specified limits on allocation to each of the asset classes. For example, in case of Quantum Multi Asset Fund, the fund manager can invest 25-65% of the portfolio in equities, 25-65% in debt and 10-20% in gold funds.

The fund manager decides the allocation of each of the asset class, taking into account various parameters such as valuations and macro-economic factors. Axis Triple Advantage Fund is another fund which offers to invest 30-40% in both equity and debt and 20-30% of the money in gold ETFs. Such funds are expected to bring in moderate capital appreciation by investing across asset classes and rebalancing the portfolio at regular intervals.

The third type of funds is monthly income plans (MIPs). It is similar to traditional MIPs that aim to come out with a monthly payout but does not guarantee it. The only difference is these funds invest in gold in addition to debt and equity against traditional mutual fund MIPs investing in a mix of debt and equity. Taurus MIP Advantage and Religare MIP Plus fall in this category with exposure to gold. Typically, the investments in gold and equity are minimal to cap the risk. We invest around 80% of money in fixed income which offers consistent returns; while the rest, which is invested in gold and equity, is actively managed. The inverse relationship between gold and equity should ideally ensure that the portfolio returns are enhanced in most time periods.

Should You Invest?

The idea of investing across investment classes look appealing and you may think that will address your problem of diversification of the portfolio and asset allocation. But that need not be the case always.

If you don't know how to do it yourself, multi-asset funds meant for financial planning are a good option, as both asset allocation and asset rebalancing are taken care of. You can choose to invest through a systematic investment plan in these schemes. These funds are expected to deliver only in the long term.

Since most of these funds have limited history, you should ideally wait and observe the fund management strategy and its performance to decide if such funds can be included in the portfolio. In some cases, actively-managed funds in this category can be good candidates for satellite portfolios. Axis Triple Advantage Fund has delivered 10.22% returns over the past one year. Kotak Multi Asset Allocation Fund has delivered 8.52% returns in one year. The rest of the schemes are yet to complete one year.

Along with individuals with income needs, individuals who want to strictly limit their exposures to risky assets, such as equity and gold, and invest for the long term can consider MIPs. If you fall in the former segment of investors, go for the dividend option and if you are from the later segment opt for the growth option. Taurus MIP Advantage and Religare MIP Plus have given 10.21% and 9.12% returns in one year. These returns are higher than 6.70% delivered by hybird debt-oriented conservative funds, that captured most traditional MIPs, says Value Research, a mutual fund tracking entity.

The Downside

These funds are taxed like debt funds and hence offer low post-tax returns. Gold is no more a 'safe' asset given the high volatility in prices. Clubbing two risky assets – equity and gold – with debt need not be a low-risk investment strategy. Not many investors can digest volatile returns if fund managers cannot manage the risk. It is better to think for a while and if convinced, take exposure through systematic investment plans.