New Fund Offer. Nothing unique about this combo

Equity markets are perched at a high but in the long term nothing beats inflation other than equity investments.

Gold prices seem to be going only southwards but over the years gold has proven to be the safest haven when equity markets go into a tailspin. And thanks to your yen for diversification, debt seems enticing too. While an investment in all these asset classes is needed to build long-term wealth, what if you were given a combination of these on one platter? And also told that you don’t have to move a finger to readjust the allocations from time to time, according to market conditions? This is what Franklin’s latest fund offering is all about.

Franklin Multi-Asset Solution is a fund-of-funds that seeks to invest between 10 and 75 per cent in equity and debt mutual funds, up to 50 per cent in gold exchange traded funds and cash and up to 5 per cent in money market instruments. Within the given limits, the fund will tweak its allocation to different asset classes on a monthly basis.

The tweak will be based on movements in economic indicators such as the OECD Composite Leading Indicators and IIP, valuation indicators such as the P/E ratio and the difference between earnings yield (inverse of P/E) and 10-year G-sec yield and sentiment indicators such as the dollar vs developed currencies index.

The underlying funds that it will invest under each asset class are: Equity – Franklin Bluechip and Prima Plus; Debt – Franklin Short term Income Plan and Income Opportunities Fund; Cash - Franklin Treasury Management Account.

Exposures to gold will be taken through existing gold ETFs.

Each asset class outperforms in different periods and it is not easy to second-guess the same. So the advantage of a multi-asset fund lies in the fact that you can passively earn from the up moves in each of them, without having to take a call on when to enter or exit.

Secondly, the funds the new scheme is investing into also have a solid track record.

But there are a few factors that might take the sheen off this fund. For one, AMC charges on fund-of-funds generally tend to be higher than many other schemes. Secondly, fund-of-funds are treated as debt funds.

This implies a higher lock-in of three years for capital gains tax purposes and no tax-free gains even if sold after the lock-in period. Thirdly, by using this route to take care of your investments in various asset classes rather than investing in diversified equity funds, debt funds and gold ETFs independently, you may be settling for sub-optimal returns.

This fund is not the first of its kind too, although coming from a top house such as Franklin.