Which is the best multi-asset allocation fund?
Due to the COVID-19 situation, equity investors are having sleepless nights as the markets have tumbled quite a bit in a span of just two months. Not just that, even the investors in the bond markets were affected, especially those, who had taken credit-bets.
Overall, no single asset can help you in creating wealth in an effective way. Thus, in order to create wealth, you need to diversify your investments across different asset classes. Multi-asset allocation funds intend to diversify assets across various asset classes such as equity, debt, gold, etc.
According to Securities and Exchange Board of India (SEBI) circular on rationalisation of mutual funds, multi-asset allocation funds are those which should invest in a minimum of three asset classes by dedicating a minimum 10 per cent of assets to each asset class.
How does asset allocation look like?
|
Type of Security
|
Allocation (per cent)
|
|
Equity and equity-related instruments
|
65-80
|
|
Debut and money market instruments including units of debt-oriented mutual fund schemes
|
10-35
|
|
Units of gold ETFs or exchange traded commodity derivatives
|
10-30
|
|
Units of real estate investment trusts and infrastructure investment trusts
|
0-10
|
The above asset allocation is what 90 per cent of the multi-asset allocation funds follow. Such an asset allocation is nothing different than aggressive hybrid funds with just a slight addition of gold.
However, this defies the purpose of the multi-asset allocation fund. The majority of the multi-asset allocation funds follow this asset allocation as 65 per cent or more assets dedicated to equity makes the fund eligible for tax treatment similar to equity funds. Only SBI Multi-Asset Allocation Fund can be termed as a pure multi-asset allocation fund. This is because of its allocation to equity and equity-related instruments range between 10 per cent and 90 per cent. It means that equity allocation can fall to as low as 10 per cent, which in case of other funds, is 65 per cent.
Which multi-asset allocation is the best?
The above graph clearly shows that SBI Multi-Asset Allocation fund is the best performing fund on a trailing basis. However, returns are not something that we should rely on. We should also consider the risk-returns metrics to account for risk factors.
|
Funds
|
Standard Deviation
|
Alpha
|
Sharpe
|
Sortino
|
|
SBI Multi Asset Allocation Fund
|
13.58
|
6.27
|
0.46
|
0.69
|
|
HDFC Multi-Asset Fund
|
19.31
|
3.15
|
0.19
|
0.26
|
|
Axis Triple Advantage Fund
|
20.36
|
3.05
|
0.16
|
0.22
|
|
UTI Multi Asset Fund
|
20.71
|
2.19
|
0.13
|
0.18
|
|
Essel 3 in 1 Fund
|
20.68
|
-0.73
|
-0.01
|
-0.01
|
|
ICICI Pru Multi-Asset Fund
|
21.67
|
-5.59
|
-0.25
|
-0.36
|
As we can see from the above table, even in risk and returns metrics, SBI Multi-Asset Allocation Fund outshines other funds. SBI Multi-Asset Allocation Fund is the least risky fund as compared to other funds measured by the standard deviation.
Hence, we can say that SBI Multi-Asset Allocation is the best fund to invest across the multi-asset allocation category.