Why a Multi Asset fund ?
#According to various studies, more than 90% of the portfolio returns are based on asset allocation decisions.
This happens because Asset classes follow different performance cycles. In other words, they have low / negative correlation with each other
It is difficult to predict which asset class will outperform at a given point in time
It is therefore best to have a fixed asset allocation within your portfolio at all points in time
This helps in portfolio diversification, relative reduction of overall risks and could lead to optimisation of returns.
But it is important that the fund you select invests across asset classes in a defined manner
Source:#Does Asset Allocation Policy Explain 40%, 90% or 100% of Performance?
Probable Allocation amongst different asset classes
- Domestic Equity (50%): Within Domestic Equity, the fund would invest 50-70% into large caps, the rest would pre-dominantly be in mid-caps
- International Equity (20%): International equity would be across geographies based on prevailing view/tactical opportunity. Overseas equity could act as an effective diversification tool as well as benefit from any currency depreciation.
- Commodities (15%): The fund will have the flexibility to invest in various commodities* to provide diversification within commodities as well. Investment will predominantly be into Gold ETFs/ETCD. Gold^ will be the key diversifier given the low co-relation to Equity & Debt.
- Fixed Income (15%): Fixed Income allocation will be predominantly in good credit quality assets. 85% of securities will be AAA followed by AA+ and AA
3-yr Rolling Returns for last 10 yrs (August 2010 – July 2020)
| Portfolio | Gold^ | Debt | Domestic Equity | Overseas Equity | |
| Average | 12.0% | 4.4% | 8.5% | 12.0% | 14.8% |
| Minimum | -1.8% | -8.3% | 6.9% | -6.4% | 2.4% |
| Maximum | 19.5% | 22.0% | 10.2% | 24.7% | 29.4% |
| Standard Deviation | 3.4% | 6.6% | 0.8% | 5.6% | 5.9% |
| Negative Instances (%) | 0.2% | 27.3% | 0.0% | 3.8% | 0.0% |
| Above 8% | 90% | 25% | 65% | 83% | 92% |
| Above 10% | 79% | 21% | 1% | 72% | 76% |
| Above 12% | 49% | 16% | 0% | 52% | 60% |
Invest now @ nippon INDIA multi asset fund Lats date 21 Aug 2020.
Source: https://www.nipponindiamf.com
