Asset Allocation Strategies: A Comparative Analysis of Top Multi-Asset Funds' Investment Approaches

Multi-Asset Funds: A Closer Look at Portfolio Construction

Multi-asset funds are often seen as a simple way to diversify a portfolio, investing across multiple asset classes such as equities, gold, and debt. However, a comparison of the five best-performing multi-asset allocation funds with assets under management (AUM) above Rs 2,000 crore reveals that portfolio construction can vary significantly within the same category.

A closer examination of the top-performing multi-asset allocation funds shows that equity exposure ranges from just 36 percent in the DSP Multi Asset Allocation Fund to more than 74 percent in the HSBC Multi Asset Allocation Fund. Similarly, gold allocation varies from around 5 percent in the Kotak Multi Asset Allocation Fund to 13 percent in the DSP Multi Asset Allocation Fund.

Top-Performing Multi-Asset Funds

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The top-performing multi-asset allocation funds delivered strong returns over the past year, comfortably outperforming many traditional diversified categories. The top five funds are:

Despite belonging to the same category and delivering broadly similar outcomes, these funds followed very different asset allocation strategies, highlighting that performance in multi-asset funds can be achieved through multiple portfolio approaches.

Equity Exposure

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A closer look at the portfolios of the top-performing funds reveals significant differences in equity exposure. The HSBC Multi Asset Allocation Fund had the highest equity allocation, with around 74 percent of its portfolio invested across large-, mid-, and small-cap stocks. In contrast, the DSP Multi Asset Allocation Fund had only around 36 percent (excluding overseas investments) invested in equities.

Gold Exposure

Gold is often one of the biggest attractions of multi-asset funds, providing exposure to gold without requiring a separate investment. However, the top-performing funds show that gold allocations can differ meaningfully from one scheme to another. The DSP Multi Asset Allocation Fund had the highest gold exposure among the top performers at 13.09 percent.

Investor Takeaways

Choosing a multi-asset fund is not just about selecting the category. Two funds carrying the same multi-asset label can have very different allocations to equities, gold, and other assets, which can influence how a fund performs during different market cycles and how much volatility investors experience along the way.