Best Multi-Asset Allocation Funds: HDFC Multi-Asset Fund vs Nippon India Multi Asset Fund

2024 has been a particularly volatile year for capital markets, driven by bouts of inflation, geopolitical tensions, and economic uncertainties.

Events such as the ongoing conflict between Russia and Ukraine and tensions in the Taiwan Strait due to China's military exercises, coupled with domestic concerns like a sharper-than-expected slump in GDP growth and currency depreciation pressures, created a challenging environment for investors.

The uncertainty surrounding elections in major economies further heightened market unpredictability, dampening investor sentiment. Looking ahead, several risks and headwinds remain firmly in place.

[Read: Why Investing in Multi-Asset Allocation Funds Makes Sense Now]

Geopolitical tensions continue to be a concern, and the return of Donald Trump as the 47th President of the United States has brought new uncertainties to global trade and foreign policy. His America-first stance, tariff policies, and potential trade disputes with China or other nations threaten to disrupt supply chains, introduce inflationary pressures, and slow economic growth.

Against this backdrop, Multi-Asset Allocation Funds offer a compelling choice for strategic and tactical asset allocation, the cornerstone of sound investing. By spreading investments across asset classes, these funds mitigate the risk of being overly reliant on the performance of a single asset type.

The inherent low correlation of asset classes often ensures that losses in one segment can be cushioned by gains in another. For instance, during periods when equity markets are under pressure, debt instruments or gold often deliver more stable returns, thus balancing out the portfolio.

Equity, as an asset class, has historically shown the potential to generate substantial wealth and beat inflation in the long term. However, short- to medium-term equity returns could be subject to drawdowns, influenced by various headwinds at play.

This is where debt instruments offer a stabilising influence to your portfolio. With the current interest rate cycle almost near its peak and attractive yields on long-term bonds, allocating a portion of the portfolio to debt and fixed-income instruments such as bank fixed deposits or small saving schemes is a prudent move.

Gold, on the other hand, continues to showcase its traditional role as a safe haven in times of geopolitical tension and economic uncertainty. The precious yellow metal has surged by nearly 27% this year, delivering its strongest performance since 2010, and highlighting its enduring value as a portfolio diversifier.

Thus, Multi-Asset Allocation Funds offer a structured approach to combining growth, stability, and risk management within a single investment product. Their adaptability to different market cycles by reallocating between asset classes based on market conditions makes them ideal for risk-conscious investors looking for a balanced approach.

[Read: Adding New Mutual Funds for Better Gains? Here's Why It Could Be a Risky Move]

In 2025, they could likely remain a strong choice for those who want to navigate the challenges of market volatility while still positioning themselves for long-term growth.

That said, a Multi-Asset Allocation Fund may be exposed to various risk factors, depending on the composition of the portfolio and the dominant asset class.

The equity component may be vulnerable to market fluctuations, liquidity, and concentration risks. The debt component, in turn, may be influenced by interest rate scenarios, liquidity, and credit profile. Similarly, the gold component (or any other commodity) is sensitive to fluctuations in commodity prices.

However, over the long term, the fund managers of a Multi-Asset Allocation Fund can potentially balance risk and returns by efficiently managing the portfolio to capitalise on market opportunities.

They evaluate macroeconomic trends (in India and globally), equity market valuations, interest rate outlook, gold outlook, and the fundamental attributes of securities to position the portfolio effectively. For investors to maximise benefits, it is essential to select a Multi-Asset Allocation Fund that aligns with their personal asset allocation strategy, financial goals, and risk tolerance.

In this article, we will compare HDFC Multi-Asset Fund and Nippon India Multi Asset Fund across key parameters to help you decide which fund is most suitable for your needs.

# - HDFC Multi-Asset Fund

HDFC Multi-Asset Fund is an open-ended scheme that belongs to HDFC Mutual Fund. It is a well-established multi-asset allocation fund launched in August 2005 and currently has an AUM of Rs 3,817.76 crores (as of Nov 30, 2024).

The scheme aims to generate long-term capital appreciation/income by investing in equity and equity-related instruments, debt and money market instruments and gold-related instruments.

HDFC Multi-Asset Fund aims to maintain a reasonably well-balanced portfolio at all times. The Scheme is benchmarked against Nifty 50 TRI as a primary index.

# - Nippon India Multi Asset Fund

Nippon India Multi Asset Fund is an open-ended scheme that belongs to Nippon India Mutual Fund. It is a well-established multi-asset allocation fund launched in August 2020 and currently has an AUM of Rs 4,683 crores (as of Nov 30, 2024).

The scheme aims to generate long-term capital growth by investing in equity and equity-related securities, debt and money market instruments and Exchange Traded Commodity Derivatives and Gold ETF, silver ETF as permitted by SEBI from time to time.

Nippon India Multi Asset Fund aims to benefit from portfolio diversification. The Scheme is benchmarked against BSE 500 TRI as a primary index.

Investment Style and Philosophy:

- HDFC Multi-Asset Fund seeks to invest in companies that have reasonable growth prospects, sound financial strength, sustainable business models, and acceptable valuations that offer potential for capital appreciation.

Investment in debt securities is guided by credit quality, liquidity, interest rates, and their outlook. The scheme also invests in Gold ETFs and other Gold-related instruments.

Additionally, the scheme aims to generate income through Arbitrage opportunities.

- Nippon India Multi Asset Fund aims to capitalise on portfolio diversification since its asset classes are weakly or negatively correlated and tend to perform at different times.

Given that asset allocation is key to wealth creation, the fund would be an ideal choice for investors looking for a comprehensive one-stop solution to reap the benefit of Growth of Equity, Stability of Debt & Diversification from Commodities.

• Performance Comparison: Rolling Returns

  Both HDFC Multi-Asset Fund and Nippon India Multi Asset Fund have delivered varied returns over different time horizons.

  Scheme Name	Absolute (%)	CAGR (%)
  	1 year	3 Years	5 Years	7 Years	10 Years
  HDFC Multi-Asset Fund	23.63	14.92	16.54	12.89	12.11
  Nippon India Multi Asset Fund	32.10	17.66	-	-	-
  Multi-Asset Funds - Category Average	21.94	17.09	18.86	14.90	13.55
  Benchmark - BSE 500 TRI	35.22	18.44	19.72	16.05	15.47

  Data as of December 24, 2024
  Do note past performance is not an indicator of future returns.
  The securities quoted are for illustration only and are not recommendatory.
  (Source: ACE MF, data collated by PersonalFN Research)

  In the short term, Nippon India Multi-Asset Fund outperformed HDFC Multi-Asset Fund with a return of 32.10%, compared to HDFC's 23.63%. This performance also surpassed the category average of 21.94% but fell slightly short of BSE 500 TRI's return of 35.22%. Nippon India's superior one-year returns highlight its ability to capitalise on recent market opportunities effectively.

  Over a three-year period, HDFC Multi-Asset Fund delivered a CAGR of 14.92%, once again trailing Nippon India Multi-Asset Fund's 17.66%. While Nippon India outperformed the category average of 17.09%, HDFC fell slightly short. The BSE 500 TRI benchmark, at 18.44%, remained ahead of both funds during this time horizon.

  HDFC Multi-Asset Fund's track record spans longer timeframes, showcasing consistent returns over five, seven, and ten years with CAGRs of 16.54%, 12.89%, and 12.11%, respectively. Although these returns fall below the category average and the benchmark over longer durations, they highlight the fund's stability and commitment to balanced growth.

  Nippon India Multi-Asset Fund does not yet have a comparable track record for these longer horizons, making it challenging to draw direct comparisons in the long term. However, the fund has demonstrated strong short- and medium-term performance, indicating a more aggressive approach to capitalising on recent market trends.

  That said, it lacks the historical depth of the HDFC Multi-Asset Fund, which has navigated various market cycles. HDFC's ability to sustain returns over a decade underscores its reliability as a consistent performer.

  For investors seeking a fund with a long-term track record and steady returns, HDFC Multi-Asset Fund offers a proven approach to managing multi-asset portfolios. In contrast, Nippon India Multi Asset Fund may appeal to those looking for higher short-term gains and a fund that has recently outperformed its peer.

• Portfolio Composition: Asset Allocation of Schemes

  Both HDFC Multi-Asset Fund and Nippon India Multi-Asset Fund are designed to offer diversified exposure across asset classes. However, their equity allocations reveal key differences in their approach to portfolio construction.

  Scheme Name	Large Cap %	Mid Cap %	Small Cap %
  HDFC Multi-Asset Fund	55.61	3.25	6.52
  Nippon India Multi-Asset Fund	38.69	8.31	4.41

  Data as of November 30, 2024
  Do note past performance is not an indicator of future returns
  The securities quoted are for illustration only and are not recommendatory.
  (Source: ACE MF, data collated by PersonalFN Research)

  HDFC Multi-Asset Fund places a substantial emphasis on large-cap stocks, with a notable 55.61% of its assets allocated to this segment. This allocation suggests a strategy focused on stability and lower volatility, making the fund a relatively safer choice for risk-averse investors who prefer to ride out market fluctuations.

  In contrast, Nippon India Multi Asset Fund allocates 38.69% to large-cap stocks, significantly lower than HDFC's allocation. This reflects a stance allowing for greater exposure to higher-growth (but higher-risk) opportunities in the mid-cap and small-cap segments.

  HDFC Multi-Asset Fund exposure to mid-cap stocks is quite limited at 3.25%, reflecting the fund's cautious stance toward potentially higher-risk, higher-return investments. Additionally, it has a 6.52% allocation to small-cap stocks, which adds some potential for growth while maintaining an overall focus on large-cap stability.

  Nippon India Multi Asset Fund, however, adopts a slightly different stance with 8.31% allocated to mid-cap stocks and 4.41% to small-cap stocks. The higher mid-cap allocation highlights the fund's willingness to explore opportunities in companies with significant growth potential, while the smaller allocation to small-cap stocks adds an element of risk but with the potential for higher long-term returns.

  HDFC Multi-Asset Fund's large cap-focused allocation makes it an ideal pick for risk-averse investors seeking stability and consistent performance. Conversely, Nippon India Multi-Asset Fund may appeal to investors with a slightly higher risk appetite, looking to balance stability with growth opportunities through its increased allocation to mid-cap stocks.

• Market Volatility: Risk Profile of Schemes

  Nippon India Multi Asset Fund has a Standard Deviation of 9.11, slightly higher than HDFC Multi-Asset Fund's 7.07. This indicates greater fluctuations in returns for Nippon India, which may appeal to investors willing to accept higher risk for potentially higher rewards.

  Risk Ratio (3 years)	HDFC Multi-Asset Fund	Nippon India Multi-Asset Fund
  Standard Deviation	7.07	9.11
  Sharpe Ratio	0.30	0.34
  Sortino Ratio	0.64	0.71

  Data as of December 24, 2024
  Do note past performance is not an indicator of future returns
  The securities quoted are for illustration only and are not recommendatory.
  (Source: ACE MF, data collated by PersonalFN Research)

  Nippon India Multi Asset Fund has a Sharpe Ratio of 0.34, higher than HDFC Multi-Asset Fund's 0.30. This suggests that Nippon India Multi-Asset Fund has delivered slightly better returns for every unit of risk taken, making it a more attractive choice for those willing to accept its higher volatility.

  With a Sortino Ratio of 0.71, Nippon India Multi Asset Fund exhibits that it has been more efficient at generating returns while minimising downside risk as compared to HDFC's fund. Investors with a focus on protecting against losses may find Nippon India Multi-Asset Fund more appealing based on this metric.

  Nippon India Multi-Asset Fund exhibits a slightly higher risk profile, as evident from its higher Standard Deviation. However, its superior Sharpe and Sortino Ratios indicate better efficiency in delivering risk-adjusted returns, suggesting a more aggressive yet calculated strategy. This makes it suitable for investors who may be willing to embrace slightly higher risk for potentially greater returns.

• Top Holdings of the Mid-Cap Multi-Asset Schemes

  Due to the dynamic nature of multi-asset funds, top holdings can change frequently. However, analysing current holdings can offer insights into the fund manager's investment philosophy.

  HDFC Multi-Asset Fund		Nippon India Multi-Asset Fund
  Company	% Assets	Company	% Assets
  Government of India	7.38	Government of India	6.32
  HDFC Bank Ltd.	6.08	ICICI Bank Ltd.	3.19
  ICICI Bank Ltd.	4.96	HDFC Bank Ltd.	2.68
  Axis Bank Ltd.	4.59	Treasury Bills	2.13
  Reliance Industries Ltd.	3.78	Infosys Ltd.	2.02
  Infosys Ltd.	3.47	Bharti Airtel Ltd.	1.74
  Mahindra & Mahindra Ltd.	3.30	Reliance Industries Ltd.	1.66
  Bharti Airtel Ltd.	2.89	State Bank Of India	1.61
  United Spirits Ltd.	2.78	Axis Bank Ltd.	1.33
  Hyundai Motor India Ltd.	1.78	Larsen & Toubro Ltd.	1.27

  Data as of November 30, 2024
  Do note past performance is not an indicator of future returns
  The securities quoted are for illustration only and are not recommendatory.
  (Source: ACE MF, data collated by PersonalFN Research)

  HDFC Multi-Asset Fund demonstrates a preference for a balanced mix of sovereign securities and large, well-established institutions.

  The Government of India securities form the largest allocation at 7.38%, highlighting the fund's focus on stability and fixed-income investments. Leading private sector banks such as HDFC Bank Ltd. (6.08%), ICICI Bank Ltd. (4.96%), and Axis Bank Ltd. (4.59%) hold prominent positions, showcasing the fund's tilt toward the financial sector, which can provide steady returns and act as a hedge during market volatility.

  Additionally, the fund includes industry leaders like Reliance Industries Ltd. (3.78%) and Infosys Ltd. (3.47%), offering exposure to key sectors such as energy and IT.

  Nippon India Multi Asset Fund adopts a slightly different approach, with Government of India bonds accounting for 6.32% of its assets. This allocation, while substantial, is less than HDFC's, indicating a relatively lower reliance on sovereign securities. ICICI Bank Ltd. (3.19%) and HDFC Bank Ltd. (2.68%) occupy prominent positions, but with smaller allocations compared to HDFC Multi-Asset Fund, suggesting a more diversified equity exposure.

  Other notable holdings include Infosys Ltd. (2.02%) in the IT sector and Bharti Airtel Ltd. (1.74%) in telecommunications, reflecting the fund's emphasis on diversified sectoral representation.

  The HDFC Multi-Asset Fund may appeal to investors seeking higher exposure to large cap equities alongside stable government securities, making it ideal for those with a moderate risk appetite aiming for long-term wealth creation.

  On the other hand, Nippon India Multi Asset Fund's diversified strategy may appeal to investors seeking moderate risk exposure with the potential for growth across a wider array of sectors.

• Expense Ratio of the Schemes

  A lower expense ratio can translate into higher net returns over time, particularly for long-term investors.

  Scheme Name	Direct Plan Expense Ratio	Regular Plan Expense Ratio
  HDFC Multi-Asset Fund	0.74%	1.91%
  Nippon India Multi-Asset Fund	0.29%	1.51%

  Data as of November 30, 2024
  Do note past performance is not an indicator of future returns
  The securities quoted are for illustration only and are not recommendatory.
  (Source: ACE MF, data collated by PersonalFN Research)

  While the Nippon India Multi-Asset Fund offers lower expense ratios for both direct and regular plans, it's important not to base your decision solely on this single factor.

  Do consider the quantitative metrics discussed above along with qualitative factors, such as the fund manager's experience and the investment processes and systems followed by the respective mutual fund house.

• Suitability of Investors to the Scheme:

  HDFC Multi-Asset Fund could be ideal for investors who prioritise stability. Its emphasis on large-cap stocks and government securities highlights its focus on providing steady returns with relatively lower volatility. While its higher expense ratio may slightly impact net returns, it remains a viable option for those who trust its long-standing track record in delivering consistent performance across market cycles.

  Nippon India Multi-Asset Fund, with its balanced exposure to mid-cap equities, government securities, and the potential for better risk-adjusted returns, can make it appealing to moderately aggressive investors. Additionally, with its lower expense ratio, Nippon India could be ideal for those looking to maximise potential returns while maintaining a diversified portfolio and keeping costs under control.

To Summarise...

Hybrid mutual funds like HDFC Multi-Asset Fund and Nippon India Multi Asset Fund can help you benefit from portfolio diversification, especially in volatile market conditions like those witnessed in 2024.

Ultimately, the choice between these funds depends on individual financial goals, risk tolerance, and investment horizons. It is essential to assess these options alongside a broader portfolio strategy and remain patient and disciplined during market fluctuations.

Happy investing!

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MITALI DHOKE is a Research Analyst at PersonalFN. She is an MBA (Finance) and a post-graduate in commerce (M. Com). She focuses primarily on covering articles around mutual funds including NFOs, financial planning and fixed-income products. Mitali holds an overall experience of 4 years in the financial services industry.
She also actively contributes towards content creation for PersonalFN’s social media platforms in the endeavour to educate investors and enhance their financial knowledge.
 

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.