When markets wobbled, diversification paid: multi-asset funds lead the returns race

Multi-Asset Funds Outshine Equities, Deliver Double-Digit Returns in 2024

Multi-asset funds have emerged as the top performers in the Indian mutual fund space, delivering double-digit returns in 2024. According to data, these funds have provided a return of around 9% CAGR over the past year, with only two of them giving double-digit returns.

• Top 10 Hybrid Funds: ICICI Prudential Equity & Debt Fund Direct Growth with a return of 14.96% and UTI Multi Asset Allocation Fund Direct Growth with a return of 14.54%
• Interest Rate: State Bank of India's one-year term deposit currently offers an interest rate of 6.25%, while the Reserve Bank of India has slashed the repo rate by 125 basis points to 5.25% in 2025
• Multi-Asset Fund Performance: These funds have outperformed equities due to their diversified structure, which allows fund managers to rebalance portfolios in response to changing market conditions
• Net Inflows: Multi-asset funds saw significant net inflows in December, with Rs 7,425.98 crore, surpassing other schemes such as mid-, small-cap, sectoral, and flexi-cap funds
• Top Performers: Nippon India Multi Asset Allocation Fund Direct Growth and Aditya Birla Sun Life Multi Asset Omni FoF Direct Growth, which have significant portions allocated to commodities, such as gold ETFs and other commodity investments

Devender Singhal, fund manager at Kotak Mahindra Asset Management Company, said, "People should look at multi-asset funds as an avenue to maximise their risk-adjusted returns. Having multiple asset classes reduces your market risk substantially."

Equity-Focused Funds vs. Multi-Asset Funds

Among the 10 equity-focused funds, the four that have delivered an over 20.26% return over the past year are Edelweiss US Technology Equity FoF Direct Growth (24%), Motilal Oswal BSE Enhanced Value Index Fund Direct Growth (27%), ICICI Prudential Transportation and Logistics Fund Direct Growth (22%), and ICICI Prudential Nifty Auto Index Fund Direct Growth (21%).

On the other hand, the 10 hybrid funds considered have delivered a return of 16.45% CAGR in the three-year period, with only ICICI Prudential Equity & Debt Fund Direct Growth fund (15%) and SBI Balanced Advantage Fund Direct Growth fund (11%) delivering double-digit returns.

Reasons Behind Multi-Asset Funds' Success

The outperformance of multi-asset funds is primarily due to their investments in gold and silver, which have been the most in-demand assets over the past year. Gold surged nearly 76% in that period, while silver skyrocketed 168%, according to Multi Commodity Exchange of India (MCX) data.

This rise was led by safe-haven demand amid uncertain global geopolitical conditions and the weakening of the US dollar. In comparison, the benchmark Nifty 50 and Sensex rose only around 8-10% in that time.