Multi-Asset Allocation Fund Basics, Taxation and Recent Performance
Why in the news
During equity market corrections, debt-oriented Multi-Asset Allocation Funds (MAAFs) held up well, showing the value of flexible asset mixes.
Key facts
- What it is: a mutual fund spreading money over equity, debt, gold, real estate and commodities to diversify and cut overall risk.
- Diversification: weak performance of one asset class is cushioned by others.
- Hybrid nature: normally placed under hybrid funds.
- Flexibility: proportions vary by fund and investor needs.
| Asset class | Role |
|---|---|
| Equity | Exposure to company performance and market growth |
| Bonds | Interest income with lower volatility |
| Gold | Inflation hedge and store of value |
| REITs | Real estate and related assets |
| Commodities | Oil, gas and agricultural products |
Strategy and tax
- Higher risk appetite and longer horizon: equity-oriented MAAFs; conservative short-term investors: debt-heavy MAAFs.
- Equity taxation: minimum 65% in equities; hybrid taxation: at least 35% equity.
Performance drivers
- More gold, silver and debt lifted returns.
- REITs, InvITs and arbitrage added diversification; foreign equity (DSP Mutual Fund) limited downside.
Exam angle
- Category: hybrid fund; thresholds: 65% and 35% equity.