SBI Multi Asset Allocation Fund: Power of Multi Asset Allocation in Volatile Markets

Market and Economic Context

The last few months have been very volatile for the Indian markets. The Nifty crossed the 26,000 level, hitting its record high in September 2024. Uncertainty about pace of rate cuts, INR depreciation and heavy FII selling sent the market tumbling down nearly 1.4% on November 21^st 2024 closing Nifty at 23,024.65. The Nifty closed the year below the 24,000 level, down nearly 2,500 points from its record high. The market has continued to volatile in January 2025 due to weaker than expected corporate earnings and uncertainty about the trade policies of the new US Administration.

The Nifty slipped below the 23,000 level on 27^th January 2025. Multi asset allocation funds which invest in 3 or more asset classes aim to provide stability in such volatile market conditions and help investors achieve their long-term financial goals by balancing risks / returns. In this article, we will review SBI Multi Asset Allocation Fund.

SBI Multi Asset Allocation Fund provided stability in volatile market

The chart below shows the performance of SBI Multi Asset Allocation Fund Vs the Nifty 50 during the volatile phase that closed the year 2024 (period 26^th September to 31^st December 2024). The SBI Multi Asset Allocation Fund experienced smaller drawdowns and delivered a higher YTD returns compared to the Nifty 50.

Source: SBI Mutual Fund. Disclaimer: past performance is not indicative of future performance.

What are Multi Asset Allocation Funds?

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 minimum 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 gold, silver, real estate investment trusts (REIT), infrastructure investment trusts (InvITs) etc.

Multi-asset allocation provides better diversification

The chart below shows the annual returns of different asset classes. You can see that different asset classes outperform / underperform each other in different market / economic conditions. You can see that debt is much more stable than equity. While equity and debt can have some positive correlation (usually with a lag) depending on fiscal and monetary policies, gold and equity are usually counter-cyclical to each other i.e. gold outperforms when equity underperforms and vice versa. As such, a combination of 3 or more asset classes can balance risk and return more effectively than a combination of just equity and debt.

Source: National Stock Exchange, MCX, Advisorkhoj Research, as on 31^st December 2024. 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 and spot price of Gold (in MCX) is used as proxy for Gold as an asset class. S&P 500 TR in INR is used as a proxy for international equities as an asset class. Disclaimer: Past performance may or may not be sustained in the future.

About SBI Multi Asset allocation Fund

The scheme was launched in 2005 and has Rs 5,903.15 Crores of assets under management (AUM) as on 31^st Dec 2024. Previously known as SBI Magnum Monthly Income Plan – Floater, this scheme in its multi asset allocation fund avatar came into being in May 2018 after AMCs rationalized and re-classified their older schemes to comply with SEBI’s mutual fund rationalization and re-classification directive. The expense ratio of the scheme is 1.62% for the regular plan. Dinesh Balachandran (Equity), Mansi Sajeja (Debt), Vandna Soni (Commodities) and Pradeep Kesavan (dedicated fund manager for overseas securities) are the fund managers of this scheme.

Smaller Drawdowns

The multi asset allocation strategy of the scheme provides some downside protection and limits downside risks in highly volatile markets. The chart below shows the drawdowns of SBI Multi Asset Allocation Fund versus Nifty 50 from 1^st January 2024 to 31^st December 2024. You can see that the fund was able to protect downside risks for investors.

Source: Advisorkhoj Research, Data from 1^st January 2024 to 31^st December 2024

The table below show the biggest drawdowns in the equity market over the last 5 years and its impact on SBI Multi Asset Allocation Fund. You can see that in the major periods of high volatility in the equity markets, SBI Multi Asset Allocation Fund saw much smaller drawdowns compared to pure equity as an asset class. This scheme can provide stability to your investment portfolio.

Source: Advisorkhoj Research, as on 31^st December 2024

Lower volatility and superior risk adjusted returns compared to peers

Standard deviation is a measure of volatility, while Sharpe Ratio is a measure of risk adjusted returns. We looked at the standard deviations and Sharpe Ratios of all multi asset allocation funds, which have completed 3 years (as on 31^st December 2024).

Source: Advisorkhoj Research, as on 31^st December 2024

You can see that SBI Multi Asset Allocation Fund (in blue) has lower standard deviations and higher Sharpe Ratios compared to most of its peer funds.

Long term wealth creation

Also, a SIP of Rs 10,000/ started at the inception of the fund would have grown to Rs 69,55,680 against a cumulative investment of Rs 22,90,000/- as on 31^st December 2024.

Source: Advisorkhoj Research as on 31^st December 2024

Why invest in SBI Multi Asset Allocation Fund?

• All-weather fund: SBI Multi Asset Allocation Fund is all-weather fund which not only provides diversification to your portfolio but also enable you to protect against potential downsides / drawdowns from a particular asset class like equity.


• Convenience: The fund invests in multiple asset classes depending on the opportunities that exist in each asset class. This saves you the hassle of investing in an equity, debt and gold / silver fund on your own. Also, you incur the cost of investing in one fund vis-à-vis if you invested separately in each asset class-based fund.


• Diversification: As the fund invests in multiple asset classes, having low correlation with each other, the opportunity for stable long-term capital growth is better. The good performance of any one asset class in a year helps cushion against the poor performance of others thus stabilising the returns.


• Actively Managed Portfolio in one Fund: The fund is actively managed which means it makes the reallocation decision across asset classes for you according to the current market scenario. This eliminates the hassle of the investors timing the market and rebalancing the portfolio consisting of multiple asset classes.


• Tax efficiency over long investment tenure: Long term capital gains (holding period of 2 years or longer) are taxed at 12.5% making this fund more tax efficient than traditional fixed income investments, especially for investors in the higher tax brackets.

Who should invest in SBI 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 minimum 3-5 years investment tenures for this scheme.

Consult with your financial advisor or mutual fund distributor if SBI Multi Asset Allocation Fund is suitable for your investment needs.