Bandhan Multi Asset Allocation Fund: A Good investment option in the current market conditions

Current market situation

The market has been volatile for the last few months (see the chart below). Global risk sentiments have been weak since the beginning of this year due to the trade policies of the Trump Administration. In the Liberation Day speech in April, President Trump announced sweeping tariffs on imports from the United States’ trading partners. The market feared that tariffs and counter-tariffs can escalate to a global trade war which can drag the global economy into a recession. The market recovered after President Trump announced a 90-day pause on retaliatory tariffs. However, uncertainty may linger on for the next few months till the trading partners of the United States, including India, are able to arrive at a mutually satisfactory resolution on tariffs. Asset allocation can provide stability to your portfolio in uncertain market conditions.

Source: NSE, Period 01.09.2024 to 31.03.2025

How have different asset classes performed in this volatile period for equities?

Source: NSE, MCX, Bloomberg, Period 01.06.2024 to 31.03.2025

You can see that the performance of different asset classes varied greatly during this period. Diversifying across multiple asset classes reduces the impact of underperformance of a particular asset class(es) in certain market conditions.

How does multi-asset allocation work?

Different asset classes perform different roles in your portfolio, e.g. equity provides capital appreciation, debt provides portfolio stability, gold provides inflation protection, etc. Different asset classes outperform/underperform each other in different market / economic conditions (see the chart below). You can see that debt is much more stable than equity. Gold and equity are usually counter cyclical to each other, i.e. gold outperforms when equity underperforms and vice versa. There is also a low correlation between domestic equities and international equities returns. Combining these asset classes may lead to relatively stable portfolio returns.

Source: National Stock Exchange, MCX, Advisorkhoj Research, as on 31^st March 2025. Nifty 50 TRI is used as a proxy for equity as an asset class, Nifty 10-year benchmark G-Sec Index is used as proxy for debt as an asset class, spot price of Gold (in MCX) is used as proxy for Gold and S&P 500 (in INR) is used as a proxy for international equities. Disclaimer: Past performance may or may not be sustained in the future.

What is Multi Asset Allocation Fund?

Multi-Asset Allocation funds are hybrid mutual fund schemes which invest in 3 or more asset classes. According to SEBI regulations, multi-asset allocation funds must invest a minimum of 10% each in at least 3 asset classes. Apart from the two most popular asset classes, debt and equity, these schemes invest in asset classes like commodities (e.g. gold, silver), international equities, real estate investment trusts (REIT), infrastructure investment trusts (InvITs), etc. The fund manager decides the proportional allocation to each asset class based on the market conditions to balance risks and returns.

About Bandhan Multi Asset Allocation Fund

The fund was launched in early 2025. Bandhan Multi Asset Allocation Fund will invest in domestic equities, international equities, fixed income / debt, commodities (gold and silver) and arbitrage (see the graphic below). The asset allocation of the scheme will ensure equity taxation.

Equity portion

The equity portion of the portfolio is actively managed using the 3D investment framework:-

• Diversity: Diversification across market cap segments and industry sectors


• Discipline: Limits for Mid and Small cap allocation, rebalanced quarterly


• Dependability: Performance track record, quality management and strong balance sheet
  
  

  

Fixed income portion

• Active duration management depending on interest rate outlook. In the current interest rate environment, the inclination is to build a high duration debt portfolio


• Allocation across Government Bonds, SDL, Corporate Bonds, and Money Market instruments. Preference for high credit quality in the debt portfolio

Commodities portion

The fund invests in gold and silver ETFs – a passively managed commodities portfolio

International equities portion

• The fund invests in international / overseas ETFs – a passively managed international portfolio


• Aims to cover the US, Developed markets ex US and Emerging Markets

Bandhan Multi Asset Allocation Fund – Outperformed the broad market since inception

Though the fund has not yet completed one year, it has made a very strong start. The chart below shows the growth of Rs 10,000 investment in Bandhan Multi Asset Allocation Fund versus the broad market index (Nifty 50 TRI) since the inception of the scheme - you can see that fund has outperformed the Nifty.

Source: Advisorkhoj Research, as on 31.03.2025

Bandhan Multi Asset Allocation Fund – limited downside risk

The chart below shows the drawdowns of Bandhan Multi Asset Allocation Fund versus Nifty 50 TRI since the inception of the fund. You can see that the fund experienced significantly smaller drawdowns compared to Nifty. This can be attributed to the asset allocation strategy of the fund.

Source: Advisorkhoj Research, as on as on 31.03.2025

Current portfolio positioning

Source: Bandhan MF Factsheet, as on 28.02.2025

Why invest in Bandhan Multi Asset Allocation Fund?

• A disciplined investment approach with no personal biases can bring consistency in performance over sufficiently long investment horizons


• Diversification across 5 asset classes, with different risk / return profiles


• Potential of generating superior risk adjusted returns


• Benefits of equity taxation

Who should invest in Bandhan Multi Asset Allocation Fund?

• Investors looking for a long-term strategic allocation to different asset classes


• Investors looking for relatively stable returns with low downside risks


• Investors with high to very high risk appetites


• Investors with long investment tenures. We recommend a minimum of 3 years investment tenure for this scheme.


• Investors should consult with their financial advisors or mutual fund distributors if Bandhan Multi Asset Allocation Fund is suitable for their investment needs.