What is a multi-asset allocation mutual fund?

1. Multi asset allocation fund is a hybrid mutual fund investing in at least three different asset classes.

2. Each of the asset class should have a minimum allocation of 10% of the portfolio.

3. A portfolio with a mix of non-correlated asset classes has lower volatility and better risk-adjusted returns.

4. The asset allocation is decided by the fund managers based on their house view or based on any proprietary algorithm.

5. If the underlying portfolio has at least 65% allocated to direct equity stock, it gets taxed as an equity mutual fund, else will get taxed as a debt mutual fund.

(Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)