Individuals can increase allocation to multi-asset funds in Samvat 2082, starting on Tuesday, as they provide a cushion against extreme drawdowns. Gold and silver have emerged as the white knights for these funds providing crucial support amid weakness in both equity and bond markets.
These funds strategically invest in equities, debt, and gold, which helps reduce overall portfolio risk and provide more stable returns. As rebalancing happens within the fund, it does not trigger taxes for the investor, making it a tax-efficient way to maintain an optimal asset mix.
Showing resilience
Multi-asset funds have consistently demonstrated resilience during challenging market phases. More recently, while the BSE 500 Index has gained only 3.8% year-to-date, some of the best performing multi-asset funds have delivered returns exceeding 15%, and even the worst performing ones yielded 6-7% returns reaffirming their strength during uncertain times. “This strong risk-adjusted performance underscores their ability to protect against the downside while maintaining growth potential,” says Nirav Karkera, head, Research, Fisdom.
Limit drawdowns
In a period when both stocks and bonds face challenges, multi-asset funds provide a cushion against extreme drawdowns. Their inclusion of low-correlated assets like commodities enables investors to navigate uncertain markets more effectively, making them a great choice for portfolio stability and risk-adjusted returns.
The flexibility for fund managers to tactically shift exposure has enabled these to capture upside potential while containing downside risks. “This adaptability has not only preserved capital during turbulent periods but has also delivered consistent risk-adjusted returns,” says Aditya Agarwal, co-founder, Wealthy.in, a wealth-tech platform.
Boost from gold, silver
The inclusion of gold and silver in the portfolio of multi-asset funds have helped balance returns and reduce overall risk. The over 50% rally in gold and silver in the last one year means an additional alpha of 5% for multi-asset funds with 10% gold/silver allocation. With markets looking at turbulent times ahead, commodity outperformance might continue for the next 12 months.
Core building block
Investors with a horizon of over five years can consider multi-asset funds as core holdings in their portfolio. “Multi-asset funds can help navigate choppy waters over next 24 months with protection against extreme market movements,” says Karan Aggarwal, co-founder & CIO, Elever, a PMS & Portfolio manager.