Are Investors Right To Bet Big On Multi-Asset Funds Now?

Multi-asset allocation funds have been in the limelight for some time due to a simple reason – these funds are attracting high inflows month on month amid wonderful returns. Among hybrid mutual fund schemes, these funds attracted the highest inflows worth Rs 8,927 crore (20 per cent of overall inflows in hybrid schemes) in December. Assets under management for the category have risen by 59 per cent from Rs 103,320 crore in December 2024 to Rs 164,730 crore by the end of 2025, AMFI data shows.

Looking at their returns, they have impressed investors with 16.14 per cent returns in CY 2025 while equity funds disappointed them. In 2024, the category grew by 14.69 per cent and in 2023 the category on an average grew by 20.5 per cent. In 2022, these funds delivered merely 5 per cent, however the performance was still better than the equity returns. Does it mean investors are doing the right thing by chasing high returns in multi asset allocation funds now?

The appeal lies less in chasing the best-performing asset and more in avoiding sharp drawdowns. Multi-asset mutual funds spread money across equities, debt, commodities like gold, silver and real estate. This mix, according to an analysis by DSP, has helped them navigate volatile phases without depending on a single market trend.

Data compiled by DSP underlines why this strategy has worked. “Equity investors believe stocks are the best investments. Those who have made money in gold or real estate only focus on their wins. The reality is mixed,” DSP notes in its analysis. Over long periods, no asset class dominates across countries. Look at the chart below.

The 20-year return data across major developed and emerging markets shows that multi-asset strategies have delivered competitive results with lower volatility. In India, China, Japan, the UK, Thailand and Pakistan, multi-asset portfolios generated returns that were comparable to or better than domestic equities in local currency terms. The US is the only market in the table where domestic equities marginally outperformed a multi-asset approach.

What stands out more than returns is risk. Standard deviation for multi-asset portfolios is consistently lower than that of domestic equities across all markets in the dataset. This reflects how losses in one asset class are often cushioned by gains in another.  According to the data, gold, for instance, has delivered strong long-term returns in several markets, while debt provided stability when equities struggled.

“The multi-asset strategy has been successful across various markets, with the possibility of delivering equity-like returns but with lower volatility,” DSP said. The data backs this up, showing that diversification has helped smoothen returns across cycles.