We are living in times marked by simmering geopolitical tensions – be it the ongoing Russia-Ukraine war, tensions in the Middle East, unprecedented escalation in Iran-US relations, the US’s interventionism under the Trump 2.0 regime, tariff wars, and more.
In such times, you cannot simply depend on one single asset class – but need to take a multi-asset approach.
Along with exposure to equities, you also need debt, gold and silver for diversification.
In 2025, while the Nifty 50 clocked 10.5% absolute return, the Crisil Composite Bond Index — which represents the debt market – clocked around 6.8%.
Gold and silver were far bolder, posting around 75% and 160% absolute returns, respectively, in 2025.
A multi-asset approach was clearly the way to beat the market in 2025. Not to say that this pattern will repeat itself, but that’s the point of this approach. It gives you exposure to various assets.
The Multi-Asset Allocation Funds category, on average, clocked 17% returns in 2025, ahead of the equity-oriented funds, as per the Value Research data.
In 2026, too, given the undercurrents, it makes sense to consider Multi-Asset Allocation Funds for tactical allocation across asset classes.
Decoding the multi-asset strategy
These funds are hybrid in nature, as the regulatory guidelines mandate a minimum allocation of 10% allocation each in equity, debt, and gold.
The fund manager has the flexibility to dynamically invest across asset classes, depending on the outlook for each asset class, valuations, interest rate scenario, macroeconomic environment, fundamentals of each security under consideration, and so on.
Thus, there is a broader scope for portfolio construction.
Usually, Multi-Asset Funds allocate around 35%-65% in equities (across market capitalisations and sectors), anywhere between 25%-55% in debt & money market instruments, and up to 20% in gold.
Some funds even invest in silver, REITs & InvITs, and overseas equities, for greater diversification.
What is the investment objective?
The investment objective is to generate capital appreciation for investors by investing predominantly in equity and equity-related instruments, debt & money market instruments and gold, and other asset classes, thus trying to reduce overall risk to the portfolio from a combined portfolio of low-correlated assets.
However, there is no assurance or guarantee that the investment objective of the fund will be achieved.
Why choose multi-asset funds in 2026?
Such a mandate potentially helps multi-asset funds limit the extreme drawdown which the aggressive hybrid funds experience.
Historical data shows that they have been resilient compared to aggressive hybrid funds in challenging phases for the equity market.
That said, keep in mind that in a bull market phase, Multi-Asset Allocation Funds may underperform Aggressive Hybrid Funds and equity-oriented funds.
The risk and advantage both depend on how the portfolio is allocated between equity, debt, gold and other asset classes. Most fund houses classify these funds as high or very high risk.
Multi-Asset Allocation Funds are a meaningful choice if you are looking at portfolio stability and earning decent risk-adjusted returns by keeping the cost of investing low.
If you have a moderately high-risk appetite and an investment of 3-5 years, Multi Asset Allocation Funds are suitable.
In the last 3 years and 5 years, these funds have clocked 17.7% and 15.8% returns, on average. If you make a prudent choice, potentially the returns could be even higher.
Top 3 multi-asset funds: A comparative analysis
Here are the top 3 funds based on risk-adjusted returns:
Performance of Top of Multi Asset Allocation Funds
| Returns – CAGR | Risk Ratios | ||||
| 3 Yrs (%) | 5 Yrs (%) | SI (%) | Std Dev (%) | Sharpe Ratio | |
| ICICI Prudential Multi Asset Fund | 19.9 | 21.7 | 16.8 | 6.6 | 1.92 |
| Nippon India Multi Asset Allocation Fund | 22.4 | 18.0 | 19.5 | 7.4 | 1.96 |
| SBI Multi Asset Allocation Fund | 19.7 | 15.8 | 12.9 | 6.7 | 1.80 |
| Category Average | 19.1 | 17.1 | – | 7.2 | 1.60 |
Source: Fund Factsheets
The Risk Measures have been calculated using calendar month returns for the last three years. Returns data as of 21 January 2026. The Risk Measures have been calculated using calendar month returns for the last three years and are as of 31 December 2025. Standard Deviation is a measure of the total volatility of the fund. Sharpe Ratio is a measure of risk-adjusted return that shows how much excess return an investment generates for each unit of risk taken.
#1 ICICI Prudential Multi Asset Fund
This fund was originally launched as ICICI Pru Dynamic Plan in October 2002. Thereafter, in April 2018, pursuant to the market regulator’s categorisation and rationalisation norms, it was rechristened as ICICI Prudential Multi Asset Fund.
It is one of the oldest in its category and today is managing assets over Rs 78,179 crore – the highest in its category.
Currently, the fund has allocated 71% of its assets in equities, and 29% in other asset classes, of which 13% is debt & money market instruments, and 7% in gold ETFs, among others. Besides, the fund is holding nearly 7% in cash & cash equivalents.
Within equities, the fund holds a diverse portfolio of over 100 stocks. At present, it has 122 stocks in its portfolio, of which 69% are largecaps, 20% midcaps, and 11% smallcaps.
The top 10 holdings are 30.6% of the portfolio, making the portfolio well diversified across sectors.
Top Holdings of ICICI Multi Asset Fund
Source: Fund Factsheet
The fund follows a mix of top-down and bottom-up approaches by focusing on business and economic fundamentals. Moreover, it has held the portfolio with conviction, as reflected by the low portfolio turnover of 27%. With its multi-asset dynamic approach, ICICI Prudential Multi Asset Fund has delivered appealing returns, as seen in the table above.
Over 5 years, the fund outperformed its category average. Moreover, the risk-adjusted basis performance over 3 years, the fund has adequately compensated its investors with a Sharpe ratio of 1.92.
#2 Nippon India multi-asset allocation fund
This fund was launched in August 2020, and its assets have grown remarkably in the last couple of years. It has an AUM of over Rs 10,661 crore.
Currently, the fund has around 53% of its assets in domestic equities, 10% in gold ETFs, 4% in silver, 6% in domestic mutual fund units, and 18% in debt & money market instruments.
Nippon India Multi Asset Allocation Fund’s allocation to equities is a bit conservative compared to some of its peers.
Besides, it is holding around 8% of its assets in cash & cash equivalents currently.
Within equities, it holds a diverse range of stocks spread across market caps. At present, it has 96 stocks in its portfolio, of which 71% are largecaps, 19% midcaps, and 10% smallcaps.
The top 10 holdings are 35.3% of its assets with exposure across sectors.
Top Holdings of Nippon India Multi Asset Allocation Fund
Source: Fund Factsheet
The portfolio positioning with a dynamic approach has yielded attractive returns for its investors. It has clocked second best return over 5 years (as of 21 January 2026).
The risk-adjusted performance over 3 years has also been appealing. Although the fund has exposed investors to slightly higher risk (standard deviation of 7.4%) than the category average, it seems well-justified on a risk-adjusted basis (Sharpe Ratio of 1.96), higher than the category average.
#3 SBI Multi-asset allocation fund
This fund was launched in as ‘SBI Magnum Monthly Income Plan – Floater’, in November 2005. Thereafter, when the mutual fund categorisation and rationalisation norms took effect, it was rechristened as SBI Multi Asset Allocation Fund.
It is currently the second-highest in terms of AUM, which is nearly Rs 13,033 crore as per the December 2025 portfolio.
At present, the fund is conservatively holding around 40% of its total assets in equities and the remaining in others (which include domestic mutual fund units, silver ETFs, gold ETFs, REITs & InvITs, and debt & money market instruments.
The fund is also holding around 8% in cash & cash equivalents.
Within equities, it is currently holding 64 stocks, of which 43% are largecaps, 25% midcaps, and 33% smallcaps.
The top 10 holdings of the fund are 28.5% of its assets, with exposure to a range of sectors.
Top Holdings of SBI Multi Asset Allocation Fund
Source: Fund Factsheet
The strategy followed by the fund has earned decent returns of 15.8% CAGR over 3 years, although over 5 years, it has yet to catch up with the category average.
The fund has exposed its investors to less risk (standard deviation of 6.7%) compared to its category average, but is an above-average performer on a risk-adjusted basis (Sharpe Ratio of 1.80).
Final word
Benjamin Graham has famously said, “At heart, uncertainty and investing are synonyms.”
He also added that while you endeavour to earn good returns, managing risk is also important.
To manage risks across asset classes, consider Multi-Asset Allocation Funds.
As a high return-low risk option, ICICI Prudential Multi Asset Fund and SBI Multi Asset Allocation Fund are the options. Nippon India Multi Asset Allocation Fund has run up in the last 3 years, but with it also comes high risk.
Happy investing!
Note: We have relied on data from www.valueresearchonline.com, www.financialexpress.com, and the factsheets published by the respective fund houses throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
Disclaimer:
Disclaimer: The above content is for informational purposes only. Mutual Fund investments are subject to market risks. Please consult your financial advisor before investing.
Rounaq Neroy has over 20 years of experience in the financial markets and investments. He is a close observer of the Indian economy and writes deeply on the capital markets, mutual funds, stocks, precious metals, asset allocation, wealth management, and investment strategy. His editorials provide interesting, actionable investment ideas to guide readers in the journey of wealth creation and make wise decisions. Rounaq was the Head of Content at PersonalFN (Quantum Information Services Pvt. Ltd.), which also owns Equitymaster.com – India’s oldest and trusted equity research house.