Gold and silver glittered and reached record highs throughout the past two years, while Indian equities markets fluctuated between peaks and troughs.
Multi-Asset Allocation Funds (MAAFs) are one type of mutual fund that took advantage of this cross-asset dispersion.
By diversifying their investments across asset classes, MAAFs produced an impressive 16 percent compound annual growth rate (CAGR) throughout this time frame, surpassing the 8–12% returns of market-capitalization-oriented equity funds, hybrid peers, and more general benchmarks.
One of the most sought-after segments in recent years, the MAAF category has drawn almost ₹93,000 crore in net inflows over the course of two years and currently has ₹1.75 lakh crore in AUM.
According to regulations, MAAFs are hybrid mutual funds that allocate at least 10% of their assets to at least three asset classes, usually debt, stocks, and commodities like gold and silver. Although their risk profiles and asset-allocation strategies vary greatly, 44 schemes now function under this diversification mandate.
For investors, this presents two important questions. First, where does a predetermined, all-in-one MAAF fit in if a well-balanced, proven portfolio has historically been built over time by combining equities, hybrid, debt, and commodities funds? Second, which MAAF actually fits your financial objectives out of the 44 schemes that offer wildly disparate asset mixes and risk profiles? Making the incorrect decision could lead to unforeseen risk or lost opportunity for profits.
This article looks at their performance histories, portfolio methods, and suitability for various investment types.
Grouping
Following legislative revisions in February 2025, a fresh generation of Fund of Funds (FoFs) has joined the market, going beyond the conventional actively-managed MAAFs. These funds can be generally divided into three groups based on their investing strategy and structure.
The first is Active Multi-Asset Allocation Funds, which use manager-driven, model-driven, and dynamic allocation.
The second is Multi-Asset Passive FoFs, which invest in a variety of asset classes’ passive index funds and exchange-traded funds.
The third type of fund structure is Multi-Asset Omni FoFs, which integrate active and passive fund structures under one roof.
Funds for Active Multi-Asset Allocation
There are currently 33 funds in this category that seek to provide asset class diversity. This includes foreign stocks, debt, gold, silver, arbitrage methods, REITs, and InvITs. Six of these initiatives have been in operation for more than seven years.
Asset allocation in these funds is largely dynamic and tactical, positioning portfolios in response to shifting market conditions, macroeconomic signals and emerging opportunities. Optimizing risk-adjusted returns is the goal. To fine-tune allocation decisions, the majority of schemes combine active fund manager judgment with quantitative inputs including economic data and value measurements.
The allocation of these active MAAFs to long equity allows for additional classification: funds with a long equity exposure of 65% or more, funds with a long equity exposure of less than 65%, and funds with no long equity exposure.
Offerings from ICICI Prudential MF, HDFC MF, and Quant MF have noteworthy track records among funds that allocate at least 65% to stocks. SBI MF and Nippon India MF are well-known brands in the 65 percent market below. In contrast, Edelweiss MAAF is the only fund in the category that does not have exposure to long-term equities.
Although balancing risk and returns is the category’s shared goal, investing strategies differ greatly. This relates to the overall risk profile, equity intensity, and asset allocation mix. Here, we outline the key asset mix distinctions that investors should be aware of.
No allocation of equity
The Edelweiss Multi Asset Allocation Fund is a noteworthy exception to the rule that most schemes retain exposure to unhedged stocks. The fund, which is structured as a debt-oriented strategy, mainly depends on arbitrage positions in gold, silver, and stocks, with accrual income from debt instruments serving as a supplement. As a result, its return profile is similar to that of arbitrage and debt funds. It produced returns of nearly 7% over the last 12 months, which is about comparable to the average returns of roughly 6% and 6.4% for the arbitrage and short-duration fund categories, respectively.
Increased allocation of equity
At the moment, 21 MAAFs have at least 65% of their investments in stocks. The majority, such as ICICI Pru, Quant, Bandhan, and HDFC MAAF, actively use arbitrage methods. Baroda BNP Paribas, Groww, and Kotak MAAF, on the other hand, maintained larger unhedged equities allocations throughout the course of the previous year, with average exposures ranging from 68 to 70 percent. Although it also raises risk, a larger unhedged equities holding often yields better long-term returns.
Heavy portfolios with mid- and small-cap stocks
Some funds continue to have a substantial bias toward small- and mid-cap stocks. In comparison to the category average of 15%, the companies with the highest exposure to this segment over the past 12 months were LIC MF (30%), Bandhan (26%), and HSBC MAAF (26%). This posture increases volatility and negative risk even while it may increase return possibilities. In contrast to the category average of 39%, funds like HDFC, Sundaram, and Shriram MAAF maintained larger large-cap exposures, averaging 55–57%.
Exposure to derivatives of gold and silver
Some schemes, such as those from Edelweiss, ICICI Prudential, and WhiteOak Capital, also use commodity derivatives, while the majority of multi-asset funds obtain exposure to gold and silver through ETFs or physical holdings. Managers can take on risk with less initial investment and more tactical flexibility thanks to derivatives. Nevertheless, the purpose of these instruments is to seize chances for arbitrage between spot and futures prices; they do not mimic the capital appreciation features of direct holdings.
Industrial commodity exposure
The Tata Multi Asset Opportunities Fund sets itself apart by using exchange-traded commodity derivatives to get exposure to industrial commodities like crude oil, copper, zinc, and aluminum in addition to gold. It usually holds up to 5% of these exposures. Additionally, the ICICI Prudential Multi-Asset Fund has made modest investments in base metal derivatives. Industrial commodities that are ordinarily hard to possess directly are indirectly accessible through these allocations.
Allocation overseas
Over the previous year, about seven funds have invested in foreign stocks. DSP MAAF (15%), Invesco India MAAF (14%), Bandhan MAAF (8%), and Nippon India MAAF (6%), as of January 2026, had significant exposure. DSP and Nippon India provide more worldwide diversification, whilst Invesco India mostly invests in US stocks.
Breadth of allocation
In at least ten of the previous twelve months, a few MAAFs from WhiteOak Capital, ICICI Pru, and Aditya Birla SL made investments in seven different asset classes. These consist of foreign stocks, debt, gold, silver, domestic stocks, arbitrage, and REITs and InvITs.
Gold versus silver
While silver exposure decreased from ₹6,200 crore to ₹5,500 crore over the previous six months (July 2025 to January 2026), the total gold allocation increased from ₹7,700 crore to ₹20,000 crore. At the moment, funds like Kotak and SBI MAAFs invest more in silver than gold. Silver acts more like an industrial commodity than gold, which primarily serves as a safe-haven asset. This adds volatility and possibility for return.
FOF MAAFs that are passive
In February 2025, SEBI released a standardized framework, which marked the beginning of a more structured phase in India’s FoF environment. Multi-Asset Omni FoFs and Multi-Asset Passive FoFs are two new components inside this redesigned framework.
Across asset classes, a Multi-Asset Passive FoF only makes investments in passive underlying schemes such index funds and exchange-traded funds (ETFs). Equity, debt, and commodity funds must get at least 10% of these schemes’ allocations.
The majority of portfolio building is benchmark-aligned and rule-based, giving fund managers little leeway. Aditya Birla Sun Life, Motilal Oswal, Bandhan, and Zerodha are the five funds that now manage around ₹392 crore in assets. Their normal plan expense ratios range from 0.5% to 0.6%.
A Multi-Asset Omni FoF, on the other hand, integrates both active and passive underlying systems into a single framework. This enables AMCs to combine passive exposure with alpha-seeking active strategies in certain asset classes.
If active calls are successful, the Omni strategy can increase risk-adjusted returns; but, it also adds greater layering costs and fund-selection risk. Six Omni FoFs currently oversee around ₹5,364 crore, with regular plan expense ratios varying from 1.1% to 1.5%.
Suitability: Before making an investment, investors should consider a number of factors. First, in addition to the costs of the underlying schemes, FoFs also impose their own expense ratio. Second, real asset weights can differ greatly amongst schemes even when the framework specifies minimum allocation limits. Third, while Omni FoFs may encounter portfolio overlap between active holdings, passive FoFs may have tracking discrepancies as a result of ETF spreads.
Scheme rationalization is another effect of the regulatory revamp. Historical performance might not accurately reflect the current obligation because AMCs had to reclassify existing FoFs under the new structure by August 31, 2025.
The fund firm recently banned new inflows into ICICI Prudential Passive Multi-Asset FoF. The plan has remained exposed to a variety of foreign equity assets since its inception.
Allotments, however, must now be country-, region-, or theme/sector-specific under SEBI’s updated FoF framework. The AMC has chosen to use grandfathering in order to comply with the new rules. Consequently, the plan will either be wound up or merged within three years, by January 2029, and will no longer take new investments.
Multi-Asset Passive FoFs are suitable for investors on a budget who want a straightforward structure and disciplined asset allocation. Investors that are at ease with active risk and have faith in an AMC’s ability to choose outperforming funds may find Multi-Asset Omni FoFs appealing.
What ought one to do?
Allocations to gold and silver have been a major factor in MAAFs’ recent outperformance. It is helpful to look at performance prior to the precious metals rally in order to assess their core capacity.
According to three-year rolling return statistics, MAAFs with more than 65% equity exposure produced an average compound annual growth rate (CAGR) of 18% between June 2018 and June 2024, which almost corresponded to the Nifty 50 Total Return Index’s 17.9% return. Leaders in the category, like ICICI Prudential Multi-Asset Fund and Quant Multi Asset Fund, contributed roughly 21% and 30%, respectively.
Moreover, MAAFs have shown resilient in recessions. These funds saw an average 26% decrease in the 2020 Covid-led meltdown, while the Nifty 50 TRI saw a 38% decline. But with -23 percent, balanced advantage funds (BAFs) were able to hold their own.
The fact that they lost about 8% during the downturn between September 2024 and March 2025, while the index and BAFs plummeted 15% and 10%, respectively, highlights their capacity to act as a buffer.
MAAFs—including active and passive FoFs—fall into two categories when it comes to taxes. The stock tax rate is 20% for short-term capital gains if redeemed within 12 months and 12.5% for long-term capital gains on gains surpassing ₹1.25 lakh annually if held beyond 12 months for active MAAFs with 65 percent or more in domestic shares.
Except for certain mutual fund schemes, those with less than 65% equity exposure and FoFs are subject to taxation. Short-term profits (within 24 months) are subject to slab rates, whereas long-term gains (beyond 24 months) are subject to 12.5% taxation without indexation.
MAAFs have proven to be effective in mitigating volatility and taking advantage of cross-asset possibilities. How they fit within your total portfolio is the true question.
With built-in diversification and tactical allocation, an MAAF can be a handy core holding for investors who do not have the time or discipline to rebalance between asset classes. However, adding an MAAF could result in overlap and less control over asset weights for seasoned investors who currently manage a structured mix of debt, equity, and commodities.
Selection becomes essential when there are more schemes using wildly disparate allocation procedures. Making the incorrect decision could change the risk profile of your portfolio by reducing growth potential or unintentionally increasing equity exposure.
In conclusion, a well-selected MAAF can be effective if simplicity and diligent rebalancing are goals. Only if you are advanced enough to handle several asset classes can a self-constructed portfolio be better if customization and accuracy are more important.
Investors should consider each fund’s long-term equity allocation range, commodity strategy, and stability throughout market cycles in addition to the category name. Product notes and factsheets are examples of AMC material that offers important insights into these areas.
ICICI Prudential Multi-Asset Fund, Quant Multi Asset Allocation Fund, and HDFC Multi-Asset Allocation Fund are examples of 65+% equity MAAFs that investors who are okay with drawdowns and want equity-like returns may want to examine.
Sub-65% equity options, such as the Nippon India Multi Asset Allocation Fund, SBI Multi Asset Allocation Fund, and UTI Multi Asset Allocation Fund, may be preferred by investors seeking greater downside protection with less equity exposure.
The Edelweiss Multi Asset Allocation Fund is a viable option for investors looking for debt-like stability with little equity participation and little upside potential.
