Multi-asset mutual funds: performance analysis

Published: October 21, 2022 at 6:00 am

We analyse the performance of multi-asset mutual funds in this article. This category is only four years old introduced by SEBI in 2018 with the re-categorization of mutual funds. Therefore we shall only look at the last 1,2,3, and 4-year trailing returns of multi-asset funds.

According to SEBI, a multi-asset fund invests in at least three asset classes with a minimum allocation of at least 10% in each asset class. Typically these assets are equity, bonds and gold, although silver should also be acceptable. Foreign equity is not considered a separate asset class but can be part of the equity component.

According to AMFI, “A multi-asset fund offers exposure to a broad number of asset classes, often offering a level of diversification typically associated with institutional investing. Multi-asset funds may invest in traditional equity and fixed-income strategies, index-tracking funds, financial derivatives, and commodities like gold.”

The problem with analysing these funds lies in deciding a suitable benchmark. Each fund in this category is benchmarked to custom indices. For example:

  • Axis Triple Advantage Fund: 65% of Nifty 50 TRI + 20% of NIFTY Composite Debt Index + 15% of INR Price of Gold
  • SBI Multi-Asset Fund: 45% CRISIL 10 Year Gilt Index + 40% Nifty 50 + 15% Price of Gold
  • ICICI Multi-Asset Fund: Nifty 200 (65%) + Nifty Composite Debt Index (25%) + LBMA (Gold)AM Fixing Prices (10%)
  • HDFC Multi-asset Fund: 90% NIFTY 50 Hybrid Composite Debt 65:35 Index + 10% Domestic Price of Gold
  • Motilal Oswal Multi-asset Fund:30% Nifty 50 TRI + 50 % Crisil Short Term Gilt Index + 10% Domestic Price of Gold + 10% S&P 500 Index (TRI)

Some benchmarks are “equity-oriented” (in terms of taxation), and some are not. Therfore there is a wide range of investment strategies in this category and binning them together is arguably incorrect.

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    At least to appreciate where each fund stands, we have put together the following benchmark: 65% of Nifty TRI + 20% of  CRISIL Composite Bond Fund Index and 15% of Gold INR. We will refer to this as the Multi-asset index. Of course, the choice of weights is arbitrary.

    The CRISIL Composite Bond Fund Index has the following indices(!):

    • CRISIL Composite Gilt Index 45.00%
    • CRISIL AAA Long Term Bond Index 17.00%
    • CRISIL AAA Medium Term Bond Index 11.00%
    • CRISIL AAA Short Term Bond Index 20.00%
    • CRISIL AA and AA+ Long Term Bond Index 2.00%
    • CRISIL AA and AA+ Medium Term Bond Index 2.00%
    • CRISIL AA and AA+ Short Term Bond Index 3.00%

    The evolution of the multi-asset index, with the constituent indices and the CRISIL Aggressive Hybrid index, is shown below. The data is from the 1st of 2013 (inception of direct plans). The multi-asset index is constructed with a simplistic daily rebalancing. A more detailed analysis will be presented later.

    Evolution of the multi-asset index (65% of Nifty TRI + 20% of  CRISIL Composite Bond Fund Index and 15% of Gold INR) compared with constituent indices
    Evolution of the multi-asset index (65% of Nifty TRI + 20% of  CRISIL Composite Bond Fund Index and 15% of Gold INR) compared with constituent indices.

    The trailing returns are tabulated below. The multi-asset index returns are marked in blue. Nifty 50 TRI returns in red, and funds with a return higher than the multi-asset index are in green.

    Note: Kindly do not make any investment decisions based on these numbers. We need more time to analyse these funds.

    Fund/Index1 Year2 Years
    Quant Multi Asset Fund(G)-Direct Plan9.767936.1358
    ICICI Pru Multi-Asset Fund(G)-Direct Plan7.155933.9666
    Tata Multi Asset Opp Fund(G)-Direct Plan2.924520.5368
    HDFC Multi-Asset Fund(G)-Direct Plan1.551716.1420
    SBI Multi Asset Allocation Fund(G)-Direct Plan1.320312.7931
    Multi-asset index1.60%15.96%
    Motilal Oswal Multi Asset Fund(G)-Direct Plan-0.30663.9277
    UTI Multi Asset Fund(G)-Direct Plan-0.320310.5035
    Nippon India Multi-Asset Fund(G)-Direct Plan-2.280814.9084
    NIFTY 50 – TRI-5.006221.3530
    Axis Triple Advantage Fund(G)-Direct Plan-7.531616.3259
    Fund/Index3 Years4 Years
    Quant Multi Asset Fund(G)-Direct Plan30.819225.0927
    ICICI Pru Multi-Asset Fund(G)-Direct Plan20.541916.4070
    NIFTY 50 – TRI16.229514.5419
    HDFC Multi-Asset Fund(G)-Direct Plan15.923713.7673
    Axis Triple Advantage Fund(G)-Direct Plan13.951514.6737
    SBI Multi Asset Allocation Fund(G)-Direct Plan11.909111.3590
    UTI Multi Asset Fund(G)-Direct Plan10.38998.5037
    Multi-asset index14.58%13.93%

    It is too early to judge these funds as the history is too short, as we cannot run a rolling returns analysis. It would be great if SEBI mandates the disclosure of respective benchmark data so that each fund can be analysed in detail.

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