Multi Asset Allocation Funds

Multi Asset Allocation Funds are a type of hybrid fund. They are required to invest at least 10% of their money in three different types of assets. To learn more, read the full blog.
Multi Asset Allocation Funds
4 mins

Multi Asset Allocation Funds are hybrid investments that are required to allocate a minimum of 10% across a minimum of three asset classes. These funds generally comprise a blend of equities, fixed income securities, and another asset class such as gold or real estate.

Investing in mutual funds is a great way to grow your wealth over time. Mutual fund is a type of investment vehicle that pools money from multiple investors to purchase securities such as stocks, bonds, and other assets. The fund is managed by a professional money manager who allocates the fund’s assets in equity market or debt instruments, depending on the type of fund they are & try to provide capital gains. Mutual funds are typically operated by investment companies or asset management companies (AMCs).

However, with so many different types of mutual funds available, it can be challenging to decide which one is right for you. One type of mutual fund that has gained popularity in recent years is multi-asset allocation mutual funds.

In this comprehensive guide, we will explore multi-asset allocation mutual funds, examining their unique characteristics and the advantages they offer to investors. Additionally, we will navigate the process of investing in these funds.

What are hybrid mutual funds?

Hybrid funds are a type of mutual fund that invests in a mix of asset classes, typically combining both equity and debt instruments. These funds aim to provide investors with diversification benefits by spreading their investments across different types of securities. The allocation between equity and debt is actively managed by fund managers based on market conditions and the fund's objectives.

What are multi-asset allocation mutual funds?

Multi-asset allocation mutual funds are hybrid funds that must invest a minimum of 10% in at least three different asset classes. These funds typically have a combination of equity, debt, and one more asset class like gold, real estate, etc. The primary objective of these funds is to provide investors with a diversified portfolio that can help reduce risk and improve returns.

Features of Multi-Asset allocation of fund

Characteristics of Multi-Asset Allocation Funds

1. Risk mitigation

Multi-asset funds offer security by spreading risk across multiple asset classes, reducing the potential impact of volatility associated with any single asset class.

2. Impartiality

Multi-asset allocation funds maintain neutrality towards any specific asset class, ensuring a balanced approach to investment.

3. Consistent income and growth

These funds provide a steady income stream by diversifying across asset classes, shielding against disruptions in any one class and maintaining a steady growth trajectory.

4. Diversification

Multi-asset funds enrich portfolios with a variety of assets, such as gold, known for stable returns, counterbalancing the volatility often associated with equities.

5. Volatility control

Through strategic allocation, multi-asset funds help mitigate portfolio volatility by managing price fluctuations across different asset classes.

6. Adaptability to market conditions

The portfolio composition of multi-asset allocation funds can be adjusted in response to prevailing market conditions, ensuring flexibility and potential optimization of returns.

Benefits of investing in multi-asset allocation mutual funds

There are several benefits of investing in multi-asset allocation mutual funds, including:

1. Diversification

Multi-asset allocation mutual funds invest in a minimum of three asset classes, which helps diversify your portfolio and reduce overall risk. Investing in a diversified portfolio can help you achieve your financial goals while minimising risk.

2. Stable returns

These funds offer may stable returns as they invest in a combination of equity, debt, and other asset classes. These funds are suitable for investors who are looking to take lower risks.

3. Professional management

Multi-asset allocation mutual funds are managed by professional fund managers who have expertise in managing different asset classes. These fund managers use their knowledge and experience to make informed investment decisions that can help maximise returns and minimise risk.

4. Diversification and risk mitigation

By spreading investments across various asset classes (stocks, bonds, real estate, etc.), these funds help reduce overall portfolio risk. When one asset class experiences a downturn, others may perform better, cushioning the impact. This diversification creates a more balanced and resilient portfolio.

5. Flexibility and adaptability

Unlike traditional funds focused on a single asset class, multi-asset funds allow for adjustments. Investors, in consultation with a financial advisor, can modify the asset allocation based on their risk tolerance, changing market conditions, and evolving investment goals. This flexibility ensures the portfolio stays aligned with your financial objectives.

6. Simplified portfolio management

Multi-asset allocation funds provide a pre-built, diversified portfolio, eliminating the need for individual investors to actively manage numerous asset classes. This can be particularly beneficial for those who lack the time, expertise, or resources to create and maintain their own investment portfolios.

7. Automatic rebalancing

These funds often feature automatic rebalancing, which helps maintain the target asset allocation over time. As market fluctuations cause the weightings of different asset classes to drift, rebalancing brings the portfolio back into alignment with the desired risk profile. This helps capture potential returns and manage risk more effectively.

8. Accessibility and convenience

Multi-asset allocation funds generally offer easy entry and exit options, often with low or no entry/exit loads depending on the specific fund and holding period. This allows for greater liquidity and flexibility in managing your investment.

Who should invest in a multi-asset allocation fund?

Whether you are a first-time investor or a seasoned one, a multi-asset allocation fund is considered to be a good way to invest in the market. This is due to its diversification factor that allows to dilution of the risks of investing in the market.

If you are a first-time investor, you can experiment by investing in a multi-asset allocation fund as it will allow you to understand how different assets perform and pick your preferred asset for further investment.

Apart from new investors, investors who have a low appetite for risk can also find multi-asset allocation funds beneficial since they will get a diverse portfolio along with the diluted risk factor.

For investors who are more inclined towards having long-term financial goals, multi-asset allocation funds can be useful with their growth potential and lower-risk factor.

When you invest in a multi-asset allocation fund, your funds are managed by professional portfolio managers who, with their knowledge of the market, help your portfolio grow.

Limitations of the multi-asset allocation funds

While multi-asset allocation funds offer diversification and professional engagement, they have their own limitations as well. They usually have higher management fees as compared to single-asset funds. This can reduce your returns, especially in low-yield environments. Since these funds are diversified, for a common man, it might be difficult to understand the nuances of the assets in which your funds are invested.

Since multi-asset funds are managed by market professionals, you, as an investor, give up control over the funds if you wish to alter them as per your preference. This additionally increases the dependability on the skills and judgement of your fund manager, which might not always be fruitful.

Additionally, while the risk is lowered with diversification, investors of multi-asset fund allocation might miss out on the high-return potential of single-asset allocation.

Taxation of multi-asset allocation fund

Taxation of multi-asset allocation funds depends on various factors. It is mainly in two sub-categories. Equity exposure and debt fund. Each of these funds are charged with short-term capital gains (STCG) and long-term and long-term capital gains (LTCG) which can be further broken down to specific fund-related nuances.

If your fund is exposed to 65% under equities, it will be treated as an “equity exposure fund”. For such a fund, STCG is taxed at 15% for all units held for less than 12 months and LTCG is taxed at 10% for any profits exceeding Rs. 1,00,000 in a fiscal year.

On the other hand, if your fund has less than 65% in equities, it will be treated as a “debt fund”. For debt funds, STCG is taxed at your personal income tax bracket for all the units if investments held under 36 months. Whereas, the LTCG is taxed at 20% by taking indexation into consideration for all units of investments held under 36 months.

In addition to this, all dividends from multi-asset allocation funds are taxable to you, the investor at 10% TDS if the amount exceeds Rs. 5,000 in a financial year.

How to invest in multi-asset allocation mutual funds on Bajaj Finserv platform

  1. Step 1: Visit the Bajaj Finserv website or download the app from Google Play Store or App Store
  2. Step 2: Navigate to 'Investments' and click on 'All Investments' on the home page
  3. Step 3: Click on 'Mutual Funds' icon
  4. Step 4: Click on 'Explore Funds'. You will be redirected to the mutual funds listing page
  5. Step 5: Filter by scheme type, risk appetite, returns, etc. or choose from the top performing funds list
  6. Step 6: All the mutual funds of the particular category will be listed, along with the minimum investment amount, annualised return, and rating
  7. Step 7: Click on 'Invest Now'
  8. Step 8: Enter your mobile number and sign in using the OTP
  9. Step 9: Verify your details using your PAN, date of birth. If your KYC is not complete, then you will have to upload your address proof and record a video
  10. Step 10: Enter your bank account details
  11. Step 11: Upload your signature and provide some additional details to continue
  12. Step 12: Choose and select the mutual fund that you want to invest in
  13. Step 13: Choose whether you want to invest as SIP or lumpsum and enter the investment amount. Click on ‘Invest Now’
  14. Step 14: Select your payment mode i.e., net banking, UPI, NEFT/ RTGS
  15. Step 15: Once your payment is done, the investment will be complete

Your investment will start reflecting in your portfolio within 2-3 working days.

Key takeaways from Multi-Asset Allocation Fund

1. Highlight flexibility and risk management

These funds cater to a wide range of investors by offering a spectrum of risk profiles. They can be conservative during volatile markets and more aggressive during growth periods. This flexibility allows investors to choose a fund that aligns with their specific risk tolerance and investment goals.

2. Emphasise all-in-one solution

These funds offer a comprehensive investment solution, combining diversification, convenience, customisation options, and active management. Investors can benefit from a well-rounded portfolio tailored to their needs without the hassle of managing individual assets.

3. Focus on benefits for different investors

Looking for diversification and convenience? These funds offer a one-stop solution. They cater to both conservative and growth-oriented investors by adjusting their strategy based on market conditions. Additionally, you can often customize your investment within the fund to further align with your goals.


In conclusion, understanding various investment options is crucial. Multi-asset allocation mutual funds, combining equity, debt, and other assets, seek to generate capital appreciation by lowering risk by diversification across asset classes. With professional management, they provide a strategic choice for long-term financial success.

If you are interested in investing in multi-asset allocation mutual funds, Bajaj Finserv offers a wide range of funds to choose from.

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Frequently asked questions

What are multi-asset allocation funds?

Multi-asset allocation funds invest in a mix of asset classes like stocks, bonds, and commodities to spread risk and enhance returns.

Is it good to invest in a multi-asset fund?

Investing in a multi-asset fund can be beneficial for diversification and potentially higher returns, but it depends on individual financial goals and risk tolerance.

Is multi-asset funds safe?

While multi-asset funds aim for diversification, they carry risk as they invest in various asset classes which can be affected by market fluctuations.

What are the benefits of multi-asset funds?

Benefits include diversification, potential for higher returns, and professional management of asset allocation across different markets.

Are multi-asset funds taxable?

Yes, multi-asset funds are subject to taxation on capital gains, dividends, and interest income, similar to other investment funds.

What is the difference between an equity fund and a multi-asset fund?

Equity funds primarily invest in stocks, while multi-asset funds allocate across various asset classes including stocks, bonds, and commodities for diversification.

What is the difference between multi-cap and multi-asset funds?

Multicap funds invest in stocks across market capitalizations, while multi-asset funds spread investments across different asset classes beyond just equities, aiming for broader diversification.

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Bajaj Finance Limited (“BFL”) is an NBFC offering loans, deposits and third-party wealth management products.

The information contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. 

This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.