Multi-Asset Funds Surge: Outperform Nifty 50, Diversify Your Portfolio

If you’re looking to diversify your investments, multi-asset allocation funds are quickly becoming a popular choice. These funds invest in at least three distinct asset classes like equity, debt, and commodities, each with a minimum 10% allocation.

They offer a hands-off way to manage your portfolio, as fund managers actively adjust holdings based on market conditions, aiming for better returns.

Understanding Diversification and Active Management

Multi-asset funds typically spread your money across Indian equities, debt, and precious metals such as gold and silver. Some even include international stocks, Real Estate Investment Trusts (REITs), and Infrastructure Investment Trusts (InvITs).

The fund manager makes strategic decisions, increasing debt or gold exposure when equities might dip, and boosting equity when growth is anticipated. This dynamic approach aims to balance risk and reward for you.

Significant Growth and Strong Returns

The mutual fund industry now boasts 35 multi-asset schemes, showing remarkable expansion. Their assets under management (AUM) jumped by 66%, rising from Rs 1.28 lakh crore in July 2025 to Rs 2.13 lakh crore by June 2026.

Wealth managers often recommend these funds, especially if you find it challenging to manage your own asset allocation. The fund manager handles these crucial decisions for you.

These funds have also delivered impressive returns over the last year, outperforming large-cap funds significantly. Data from Value Research shows an average return of 12.77% for the multi-asset category.

The top-performing fund within this category achieved a 23% return, while the Nifty 50 only saw a 2.04% return during the same period. This strong performance was largely driven by allocations to precious metals.

Silver prices appreciated by a staggering 93.5%, and gold by 42.92% in rupee terms over the past year. Funds with 10%-25% exposure to these metals benefited greatly from this surge.

Navigating Taxation for Multi-Asset Funds

How your multi-asset fund is taxed depends on its equity exposure. There are two main types to consider for tax purposes.

For Equity-Oriented Funds, which invest 65% or more in Indian equities:

If you hold units for less than a year, your short-term capital gains are taxed at 20%.

For units held longer than a year, long-term capital gains are taxed at 12.5%, with an annual exemption of Rs 1.25 lakh.

For Non-Equity-Oriented Funds, holding between 35% and 65% in equities:

Short-term gains for these funds are taxed according to your income-tax slab rates.

Long-term gains are taxed at 12.5%, but only after a holding period exceeding 24 months.

Understanding these aspects can help you make informed decisions about whether multi-asset funds fit into your financial plan. They offer a balanced approach, especially if you’re just starting your investment journey.