In a situation where benchmark equity indices are at record levels and even gold is close to its all-time highs, making an investment choice is not easy. Even bonds have rallied in recent months, with yields declining steadily.

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Thus, asset allocation becomes critical at this juncture because investors must ensure no potential opportunity is missed and at the same time, a correction in any specific asset class doesn’t seriously hurt their overall portfolio.

Multi-asset funds, which invests in a blend of equity, debt and gold, may be suitable for investors with a modest risk appetite and even for seasoned players in the market as a healthy mix of assets would be desirable in the present times.

Equity, debt and gold have very little correlation to each other’s moves across timelines. Returns tracked over the past 15-20 years suggest that equity-debt, gold-debt and equity-gold have negative or very low correlation coefficients. Thus, a diversified portfolio with all three asset classes in appropriate ratios based on individual risk appetites would tend to lower risks and give a smoother ride towards goals.

In this regard, ICICI Prudential Multi-Asset Fund (ICICI Prudential Dynamic earlier) may be a good choice for investors, given its consistent show over the past 20-plus years. Its track record over the past five-seven years is especially strong. Investors can consider lump-sums or SIPs in the fund with a horizon of at least five years.

Sterling performance

ICICI Prudential Multi-Asset Fund (ICICI MAF) has been among the top couple of schemes in its category over the medium and long terms.

In the last one year, it has delivered nearly 32 per cent returns on a point-to-point basis. Over 3-10-year timeframes, it has given nearly 17-24 per cent returns compounded annually.

When three-year rolling returns are taken over the period January 2013 to March 2024, ICICI MAF has delivered mean returns of 15.5 per cent, making it among the best in the category.

The return distribution is impressive, too. If three-year rolling returns are taken over the same period mentioned earlier, the fund has given over 10 per cent returns nearly 83 per cent of the time. Further, it has given more than 12 per cent returns more than 71 per cent of the times and in excess of 15 per cent just a little less than half the time, all compounded annually.

When SIP returns (XIRR) over the past a 10-year period is considered, the figure is an impressive 17.9 per cent.

This ICICI MAF has not only delivered robust returns, it has also been very consistent in doing so.

Deft portfolio moves

The scheme invests in a blend of stocks, derivatives (for safe hedging and at times accruals as well) gold, silver and other exchange traded commodity derivatives (ETCDs). Debt and cash also form a key part of the portfolio. It seeks to keep gross equity exposure (without adjusting for derivative exposure) to around 65 per cent of the portfolio, which mostly ensures equity taxation for investors.

As a fund, ICICI MAF follows a keen valuation-based approach to shuffle assets for optimal risk-adjusted returns. So, when equity markets are on a frenzy with multiples going way beyond comfort levels, the fund promptly trims stock exposure. It has been able to do well on this aspect over the years. In recent times, when markets nose-dived during January-March 2023, the fund increased net equity exposure (including derivatives) from 61.9 per cent levels to 68.6 per cent in March 2023. This move allowed it to take advantage of falling markets and attractive valuations. As markets surged ahead, the fund brought down net equity exposure to 57.5 per cent by December 2023.

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In its recent January portfolio, ICICI MAF has 66.42 per cent gross equity, 10.5 per cent in ETCDs, gold and silver ETFs (mild exposure) and 27.6 per cent in debt, predominantly term deposits, government and corporate securities. Most of the debt exposure is sovereign and other securities that carry the highest credit ratings.

The fund’s derivative exposure includes stock and index futures and covered calls.

ICICI MAF’s equity exposure is quite diffused across stocks and the picks are mostly large-caps in the Nifty 100 basket, with some mild exposure to mid-caps well.

There is a fair degree of stability in sector choices with banks, automobiles, financial services and IT being among the main holdings.

ICICI Prudential Multi-Asset can be a great addition to the core of your portfolio with a five-seven year timeframe.

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