Multi-Asset Fund
A multi-asset fund is a mutual fund scheme that mandatorily invested in at least three asset classes — such as equity, debt, and gold — with a minimum allocation of at least 10 percent in each, providing built-in diversification within a single fund.
SEBI's mutual fund categorisation circular of October 2017 defined multi-asset allocation funds as schemes required to hold a minimum of 10 percent in at least three asset classes. In practice, most multi-asset funds in India invested across equity, debt, and gold, with some also including silver, REITs, InvITs, or international equity within their mandated ranges. The fund manager was typically given a mandate to vary allocations dynamically based on valuations and market conditions, making multi-asset funds an active, discretionary solution for holistic portfolio construction.
The appeal of multi-asset funds was the outsourcing of tactical allocation decisions to a professional manager within a single product. Rather than maintaining separate SIPs into equity, debt, and gold ETFs and periodically rebalancing, an investor could rely on the fund manager to shift weights between asset classes as valuations changed. During periods of expensive equity valuations, the manager could reduce equity weight and increase debt or gold; during corrections, equity allocation could be increased. This dynamic rebalancing was handled within the fund NAV with no immediate tax implication for the investor.
Taxation of multi-asset funds was determined by their equity exposure. SEBI and income tax rules defined an equity-oriented fund as one with more than 65 percent in equity and equity-related instruments. If a multi-asset fund maintained this threshold, it qualified for equity fund taxation: LTCG above Rs 1.25 lakh at 12.5 percent after one year, and STCG at 20 percent within one year. Funds with equity exposure between 35 and 65 percent and debt exposure above 35 percent qualified as a separate category for taxation purposes under rules applicable post April 2023, while funds that did not meet the equity-oriented threshold were taxed at slab rates.
Prominent multi-asset funds in India included offerings from ICICI Prudential, Quant, Nippon, Axis, and UTI, each with somewhat different asset allocation philosophies. Some funds maintained relatively stable allocations, while others were distinctly dynamic. Reviewing the actual asset allocation history and rationale, not just the fund's name, was important to assess whether the manager's approach aligned with an investor's expectations.
For investors who lacked the time or expertise to manage their own asset allocation across multiple accounts and instruments, multi-asset funds provided a convenient, professionally managed solution. The risk was single-manager concentration and the possibility that the fund's tactical calls could underperform a static, self-managed allocation during certain market phases.