Given that asset class performance is cyclical and unpredictable, investors are increasingly realising that having a balanced, structured portfolio is key for returns as well as peace of mind. In a bid to tap this trend, Shriram Asset Management Company, part of the Shriram Group, has launched Shriram Multi Asset Allocation Fund, which aims to offer long term inflation-adjusted wealth creation through exposure to multiple assets such as equity, debt, and gold/silver ETFs. The New Fund Offer (NFO) will close on September 1, 2023. With this product, the multi asset allocation fund category has received its 14th offering. Here is a lowdown.

Investment avenues

The multi asset allocation hybrid fund category is dominated by ICICI Prudential Multi Asset Fund (Rs. 22,000 crore AUM). HDFC Multi Asset, Tata Multi Asset Opportunities, Nippon India Multi Asset, SBI Multi Asset Allocation and Axis Multi Asset Allocation individually have AUMs between Rs. 1,300 crore to Rs. 1,900 crore.

Multi asset allocation funds invest in a variety of asset classes. For investors who want lower volatility and greater predictability of returns, multi-asset offerings may be a good option to consider. Of course, the fund getting the asset allocation mix right and the optimal equity exposure for returns kicker are important factors that will determine your actual returns experience.

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Between 65-80 per cent of Shriram Multi Asset Allocation’s corpus will be invested in equity, which includes 30 to 40 stocks from Shriram AMC’s proprietary ‘Enhanced Quantamental Investment’ (EQI) model. The model relies on statistical data to make the right investment decisions for better fund performance while integrating quant as well as fundamental inputs for portfolio construction.

The minimum allocation of 65 per cent to equities allows investors in this fund to benefit from Long Term Capital Gains tax. The fund would also allocate 10-25 per cent of funds in high quality (AAA) short- to medium-term debt, preferably in government and government-backed securities to avoid any credit risk; 10-25 per cent in gold/silver ETFs, with the option up to 10 per cent in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).

The fund’s benchmark is Nifty 50 TRI (70%) + NIFTY Short Duration Debt Index (20%) + Domestic prices of Gold (8%) + Domestic prices of Silver (2%).

Our take

Multi-asset allocation funds aim to build a portfolio that does well in different environments. Broadly, most of the multi-asset allocation funds have high levels of net equity exposure (around 65 per cent). However, any fixed asset allocation strategy, especially where equity levels are anchored around rigid levels, robs the portfolio of the benefits of asset rotation, which may have been the original intent of the investor.

Most of the big funds in the multi-asset allocation category do not have a pure-play long track record. Some new offerings have added international equity asset class to differentiate themselves, but it remains to be seen whether international equity returns in future are going to be un-correlated to domestic equities.

Shriram AMC is a very small player (less than Rs 300 crore AUM in all). It doesn’t appear to have the prior solid experience in managing multi-asset portfolios of this potential scale, which is extremely important given the complicated interplay between multiple assets and investment decisions involved. So, let Shriram Multi Asset Allocation Fund walk the talk on track record first.

Also, investors generally must be clear in their objective in taking a multi-asset fund. If they already have exposure to dynamic asset allocation or balanced advantage funds or hybrid funds, a multi-asset fund only adds commodities such as gold and sliver to the mix. Exposure to standalone commodity ETFs can do the same trick for your portfolio.