Why Gold and International Exposure Matter in Multi-asset Allocation Funds

A multi-asset allocation fund can invest in different asset classes like gold, , and other asset classes to help balance risk and returns across changing market conditions.

Multi-asset allocation funds invest across different asset classes like equity, debt, and gold, aiming to diversify risk instead of relying on a single asset class. Over the last 1 year (as of February 2026), this category has delivered:

While these figures reflect past performance and may vary depending on market conditions, they highlight how diversification and exposure can influence portfolio behaviour across different market phases.

What is a Multi-Asset Allocation Fund

It is an allocation fund designed to invest across different asset classes rather than relying on a single one. The idea is simple. Different assets react differently to changing market conditions. When one asset class faces pressure, another may offer support, depending on market situations. Scheme can invest in various commodities as per asset allocation.

This approach helps investors aim for a more balanced investment experience rather than chasing short-term trends. Multi-asset allocation funds usually include equity, debt, and commodities like gold, along with exposure to global markets.

Why is Diversification of Asset Classes Required?

Diversification is a core principle of long-term investing. Putting all investments into one asset class can increase the impact of market ups and downs. Multi-asset allocation funds spread investments across asset classes so that the overall portfolio does not depend on a single source of performance.

Each asset behaves differently during economic cycles, interest rate changes, and global events. Depending on market conditions, this diversification may help manage risk while keeping the portfolio aligned with long-term financial goals.

What’s the Role of Commodities like Gold in a Multi-asset Portfolio?

Gold plays a distinct role in a multi-asset portfolio by adding diversification alongside equities and debt instruments. Since gold often behaves differently from equity markets during periods of uncertainty, it may help balance overall portfolio movements, depending on market conditions.

In a multi-asset allocation strategy, gold is typically included as a diversifier rather than a primary return-generating asset. Its presence can help reduce reliance on a single asset class and may support portfolio stability across varying market phases.

That said, gold prices are influenced by several factors such as global economic trends, currency movements, interest rates, and demand patterns. As a result, its performance can fluctuate, and investors should consider it as part of a broader, well-balanced investment approach.

What can be the Benefit of International Equity Exposure?

International equity exposure allows investors to participate in global growth opportunities beyond domestic markets. Different countries and regions may perform differently at the same time, depending on economic cycles and policy changes.

By including international equities, multi-asset allocation funds reduce reliance on market performance. This exposure may help balance portfolio risk, depending on market conditions. It also allows investors to gain access to global businesses and sectors that may not be available locally.

How Do Multi Asset Funds Balance Risk?

Multi-asset allocation funds aim to balance risk by spreading investments across different asset classes and adjusting exposure based on market conditions and investment objectives.

This balance is achieved through the following elements:

• Equity allocation helps provide growth potential, depending on market conditions.

• Debt exposure adds relative stability to the portfolio and may help manage fluctuations.

• Commodity allocation acts as a diversification element and may support the portfolio during uncertain market phases.

• Investing in overseas securities mayoffer geographic diversification, reducing reliance on a single market.

The fund manager focuses on maintaining this balance rather than predicting market movements. This approach may help manage downside risk while allowing participation in market upswings, depending on market behaviour, with an emphasis on consistency rather than aggressive positioning.

What’s the Impact on Portfolio Volatility and Returns?

By investing across multiple asset classes, a multi-asset allocation fund's returns may show relatively less volatile movement than portfolios focused on a single asset. Volatility can be mitigated because losses in one asset may be offset by gains in another, depending on market conditions.

However, returns are not guaranteed and may vary over time. Investors should understand that diversification helps manage risk but does not eliminate it. Market movements, global events, and economic changes can still influence outcomes.

Who are the Ideal Investors for Multi Asset Allocation Funds

Multi-asset allocation funds may be suitable for investors who prefer a diversified approach without actively managing their own asset allocation. This approach may be relevant for:

• Investors with a moderate risk tolerance, depending on market conditions

• Individuals with a long-term investment horizon, aligned with their financial goals

• Those seeking a balanced mix of growth and stability, rather than focusing on a single asset class

• Investors who want exposure to multiple asset classes through one fund

The multi-asset allocation fund for an investor depends on factors such as personal risk appetite, investment duration, and overall financial planning, and should be chosen accordingly.

A Balanced Way to Navigate Market Uncertainty

Other assetplay an important role in shaping the character of multi-asset allocation funds. Together, they help reduce dependence on a single market or asset class, offering diversification across geographies and investment types.

While outcomes depend on market conditions, this balanced structure can support investors through different market phases. Understanding how each component works helps investors set realistic expectations and make informed decisions aligned with their long-term goals.

Disclaimers:

The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.