ICICI Pru Multi-Asset Fund vs Quant Multi-Asset Fund: Which One is Riskier?

On a year-to-date basis (as of February 12, 2025), the BSE MidCap and BSE SmallCap indices have dropped by 9% and 11%, respectively.

Investors in equity mutual funds have also witnessed a substantial decline in their portfolio value amid the recent market correction.

Several global and domestic factors - including US President Donald Trump's protectionist policies and their impact on global trade, geopolitical tensions in many parts of the world, a GDP growth slump, and a weakening rupee - are expected to keep the markets volatile in the near term.

In the current market scenario marked by heightened volatility and uncertainty, hybrid mutual funds offer a balanced investment approach that can help investors navigate the turbulence. By investing in a mix of equity and debt instruments, hybrid funds provide both growth potential and stability.

[Read: The Key Factors Behind the Recent Volatility in the Indian Equity Market]

The equity component allows investors to capitalize on market opportunities, while the debt portion cushions against downside risks, ensuring relatively lower volatility. This diversified allocation makes hybrid funds an ideal choice for investors seeking moderate returns with reduced risk exposure amidst the ongoing market fluctuations.

Against this backdrop, Multi-Asset Allocation Funds under the hybrid mutual funds category present a compelling investment choice with their tactical asset allocation, which is the cornerstone of sound investing.

By spreading investments across multiple asset classes (primarily equity, debt, and gold), they reduce the risk associated with overexposure to any single asset category.

The low correlation between these asset classes often helps cushion losses in one segment with gains in another. For example, when equities face downward pressure, assets such as debt instruments or gold often provide more stable returns, helping to maintain overall portfolio balance.

Having said that, a Multi-Asset Allocation Fund can be subject to various risk factors, depending on the portfolio's composition and the dominant asset class.

[Read: 3 Best Multi Asset Allocation Funds for 2025 - Top Performing Multi Asset Allocation Mutual Funds in India]

Therefore, selecting the right Multi-Asset Allocation Fund requires careful consideration of financial goals, risk tolerance, and the scheme's asset allocation approach.

Note: In my previous article, I have covered the two top performing multi-asset allocation funds. You may consider reading - Best Multi-Asset Allocation Funds: HDFC Multi-Asset Fund vs Nippon India Multi Asset Fund

In this article, we will compare the two popular funds under multi-asset category - Quant Multi-Asset Fund and ICICI Pru Multi-Asset Fund across key parameters to help you decide which fund is most suitable for your needs.

# - Quant Multi-Asset Fund

Quant Multi-Asset Fund is an open-ended scheme that belongs to Quant Mutual Fund. It is a well-established Multi-Asset Allocation Fund launched in January 2013 and currently has an AUM of Rs 3,162.10 crores (as of Jan 31, 2025).

The scheme aims to generate capital appreciation and provide long-term growth opportunities by investing in instruments across the three asset classes - equity, debt, and commodity. The Scheme is benchmarked against BSE 200 - TRI as a primary index.

# - ICICI Pru Multi-Asset Fund

ICICI Pru Multi-Asset Fund is an open-ended scheme that belongs to ICICI Prudential Mutual Fund. It is a well-established Multi-Asset Allocation Fund launched in January 2013 and currently has an AUM of Rs 52,760.77 crores (as of Jan 31, 2025).

The scheme aims to generate capital appreciation for investors by investing predominantly in equity and equity-related instruments and income by investing across other asset classes. The Scheme is benchmarked against Gold-India as a primary index.

Investment Style and Philosophy:

- Quant Multi-Asset Fund's underlying theme guiding relative allocation is their research ability to identify cross-asset and cross-market inflexion points. The quantitative approach is based on their proprietary VLRT framework - Valuation Analytics, Liquidity Analytics, Risk Appetite Analytics, and Timing.

The fund differentiates itself on its ability to not just identify bouts of greed and fear but also its capacity to quantify bouts of euphoria and capitulation.

- ICICI Pru Multi-Asset Fund adheres to a disciplined investment process and an active approach to portfolio management. The fund managers dynamically manage equity and debt allocation in response to market valuation.

They evaluate sectors using a top-down approach, favouring those with strong fundamentals and shifting away from the ones where valuations appear stretched.

When selecting stocks, they adopt a bottom-up approach to identify companies with above-average profitability backed by sustainable competitive advantages.

Performance Comparison: Rolling Returns

In the short term, Quant Multi-Asset Fund delivered an impressive 42.29% return, significantly outpacing ICICI Pru Multi-Asset Fund (29.16%) as well as the category average and the benchmark.

Even over medium and long-term horizons, Quant Multi-Asset Fund has maintained its edge. ICICI Pru Multi-Asset Fund, while trailing Quant, has nonetheless delivered solid returns that have surpassed the category average and benchmark in most cases.

For aggressive investors seeking high-growth potential, Quant stands out, whereas ICICI Pru could better suit those prioritising steady, time-tested performance.

Portfolio Composition: Asset Allocation of Schemes

As you can see from the above table, Quant Multi-Asset Fund has a relatively lower large-cap exposure at 37.81%, compared to ICICI Pru Multi-Asset Fund's 50.46%, indicating a more flexible strategy.

Instead, Quant allocates a significant 52.14% to 'Others,' which could include alternative assets like commodities, potentially for diversification beyond equities.

ICICI Pru Multi-Asset Fund, with a higher mid-cap allocation (12.19% vs. Quant's 7.26%), leans toward capturing mid-sized growth opportunities while maintaining a large-cap heavy core. Its lower 'Others' allocation (33.79%) suggests a more traditional asset mix. Small-cap exposure remains modest for both, at 2.77% for Quant and 3.54% for ICICI Pru.

Investors seeking higher equity exposure may prefer ICICI Pru, while those looking for broader diversification might find Quant Multi-Asset Fund more appealing.

Market Volatility: Risk Profile of Schemes

Quant Multi-Asset Fund exhibits a significantly higher Standard Deviation of 14.72 compared to ICICI Pru Multi-Asset Fund's 7.88, indicating greater volatility in returns.

ICICI Pru Multi-Asset Fund delivers better risk-adjusted returns, as reflected in its superior Sharpe Ratio of 0.43 versus Quant's 0.24. This means ICICI Pru has provided higher returns per unit of risk taken. Similarly, its Sortino Ratio of 0.98 - almost double Quant's 0.49 - suggests better downside risk management.

Quant Multi-Asset Fund's aggressive nature may appeal to high-risk investors seeking strong growth potential, while those seeking lower volatility and efficient risk-adjusted returns may find ICICI Pru Multi-Asset Fund to be a better fit.

Top Holdings of the Multi-Asset Schemes

Quant Multi-Asset Fund's top holdings are dominated by well-established players like Reliance Industries Ltd. (9.74%), Larsen & Toubro Ltd. (8.59%), and ITC Ltd. (7.47%).

It also has notable exposure to Premier Energies Ltd. (7.26%) and JIO Financial Services Ltd. (6.65%), indicating a preference for growth-oriented companies. Treasury Bills (6.59%) and Government of India securities (3.31%) add an element of stability.

In contrast, ICICI Pru Multi-Asset Fund maintains ICICI Bank Ltd. (4.43%) and Maruti Suzuki India Ltd. (4.16%) as its top holdings. The fund also has a balanced allocation towards Treasury Bills (3.40%) and Government securities (1.97%), offering stability.

Overall, the Quant Multi-Asset Fund leans towards a high-growth strategy, while the ICICI Pru Multi-Asset Fund maintains a more balanced allocation with a mix of financials, autos, and government securities.

Expense Ratio of the Schemes

Quant Multi-Asset Fund and ICICI Pru Multi-Asset Fund have almost similar direct plan expense ratios (0.74% and 0.72% respectively), but Quant's regular plan (2.41%) is notably higher than ICICI Pru's (1.46%).

A lower expense ratio can lead to better net returns over time, especially for long-term investors, presenting ICICI Pru's regular plan as the more cost-effective option.

However, expense ratios alone shouldn't drive decisions. Do consider other metrics like risk-adjusted returns, asset allocation strategy, and the investment processes followed by the respective mutual fund house to make a well-rounded investment decision.

Suitability of Investors to the Schemes

Quant Multi-Asset Fund could suit aggressive investors seeking high growth and diversification. Its more volatile nature may appeal to those comfortable with market fluctuations and looking for long-term capital appreciation.

ICICI Pru Multi-Asset Fund could be ideal for those preferring a balanced approach with lower volatility. Its relatively lower expense ratio and better risk-adjusted returns may appeal to moderate investors aiming for steady long-term growth.

To Summarise...

In the current volatile market conditions, hybrid mutual funds like Quant Multi-Asset Fund and ICICI Pru Multi-Asset Fund offer diversification benefits, helping investors balance risk and reward effectively.

Ultimately, the right choice for addition of multi-asset allocation funds to your portfolio depends on individual financial goals and risk tolerance. Regularly monitoring portfolio performance and staying put through market fluctuations is crucial to generate long-term wealth and achieve the envisioned financial goals.

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.