With 74 per cent of March net inflows, this mutual fund category is trending - are you part of it?

Let’s find out which mutual fund category is attracting mutual fund investors and the reasons behind the surge

In recent times, multi-asset mutual funds have emerged as a preferred choice among investors seeking balanced diversification and reduced volatility. As per the latest edition of Motilal Oswal Asset Management Company's report ‘Where the Money Flows’, these funds secured a remarkable 74 per cent share of the net inflows in the hybrid category during March 2025, a clear indication of growing investor confidence in this versatile investment avenue.

What are multi-asset mutual funds?

Multi-asset mutual funds are hybrid schemes that invest in a combination of at least three different asset classes, typically including equity, debt, and gold. Some may also include international equities or real estate investment trusts (REITs), depending on the scheme's mandate. According to SEBI guidelines, these funds must maintain a minimum allocation of 10 per cent in at least three asset classes at all times.

The key idea is to create a well-balanced portfolio that can withstand market fluctuations by tapping into the non-correlated nature of different assets. For instance, when equity markets are under pressure, debt or gold allocations can offer stability and cushion the downside.

Why are they gaining traction?

The renewed interest in multi-asset funds can be attributed to several factors:

1. Diversification with Convenience: Investors today are more aware of the importance of asset diversification. Multi-asset funds offer a one-stop solution by combining different asset classes under a single umbrella, saving investors the effort of managing them individually.

2. Lower Volatility: These funds tend to offer smoother returns over time due to diversification. The risk is spread across asset classes, which helps reduce the impact of market volatility, especially during uncertain macroeconomic conditions.

3. Professional Management: These funds are managed by experienced fund managers who tactically shift allocations based on market conditions, helping optimize returns and manage risk more efficiently than a DIY portfolio.

4. Appealing to Conservative and New Investors: With rising awareness and market participation, especially among new retail investors, multi-asset funds offer an ideal entry point for those seeking a balanced exposure without diving deep into high-risk equity or low-return debt instruments alone.

The road ahead

As markets remain dynamic and macroeconomic uncertainty continues, multi-asset funds are well-positioned to attract long-term investors who value stability, flexibility, and simplicity. They bridge the gap between aggressive and conservative investing by combining growth potential with risk mitigation. For investors looking to build a resilient portfolio with minimal active involvement, multi-asset mutual funds could very well be the cornerstone of a balanced investment strategy.