Welcome to PersonalFN’s weekly analysis on diversified equity mutual funds! In this issue, we have analysed HDFC Multi-Asset Fund, highlighting its performance, peer comparison, investment strategy, fundamentals, portfolio, and suitability.

HDFC Multi-Asset Fund is a conservatively managed Multi-Asset Fund that has showed reasonable growth in the 2020 market crash as well as the current bull phase. It has rewarded investors with decent risk-adjusted returns and has displayed its potential to generate stable returns.

What is the growth of Rs 10,000 invested in HDFC Multi-Asset Fund five years ago?

Past performance is not an indicator of future returns
Data as of September 11, 2024
(Source: ACE MF, data collated by PersonalFN) 

Launched in August 2005, HDFC Multi-Asset Fund was earlier known as HDFC Multiple Yield Fund and categorised as a Monthly Income Plan. Accordingly, the fund invested predominantly in debt instruments with some allocation to equities. However, post SEBI’s categorization norms for mutual funds, the scheme was reclassified as a Multi-Asset Fund in mid-2018. The fund now holds an equity-oriented portfolio, investing at least 65% of its assets. The fund also holds a minimum allocation of 10% each in debt and gold to reduce the portfolio volatility.

HDFC Multi-Asset Fund has performed remarkably under its current mandate, particularly from 2020 onwards, outperforming the benchmark and some of its peers. The fund stood strong during the market crash of 2020 when compared to its peers and was reasonable when compared to the CRISIL Hybrid 35+65 Aggressive index. Moreover, it has performed reasonably in the current bull phase, outpacing the index by around 2 percentage points.

In the last five years, HDFC Multi-Asset Fund has grown at a compounded annualised growth rate of 17.9%, about a percentage point higher than the 16.9% CAGR generated by CRISIL Hybrid 35+65 Aggressive index. An investment of Rs 10,000 in HDFC Multi-Asset Fund five years back would have now grown to Rs 22,829 compared to a valuation of Rs 21,814 for a simultaneous investment in the Crisil index. The fund seems well placed in terms of portfolio characteristics now and has the potential to outpace the benchmark over the long run.

How has HDFC Multi-Asset Fund performed on a rolling return basis?

Scheme Name	Corpus (Cr.)	1 Year	2 Year	3 Year	5 Year	7 Year	Std Dev	Sharpe
Quant Multi Asset Fund	2,725	35.39	24.46	29.11	27.63	20.22	14.04	0.37
ICICI Pru Multi-Asset Fund	48,201	28.54	21.99	25.34	19.98	16.76	8.75	0.53
Tata Multi Asset Opp Fund	3,263	23.76	16.93	17.77	—	—	8.18	0.36
Nippon India Multi Asset Allocation Fund	4,095	28.35	18.07	17.60	—	—	9.11	0.35
UTI Multi Asset Allocation Fund	3,460	33.65	21.28	17.15	14.33	11.72	8.91	0.41
SBI Multi Asset Allocation Fund	5,866	25.47	17.36	15.57	14.64	12.11	7.30	0.38
HDFC Multi-Asset Fund	3,525	21.04	14.96	15.52	15.66	12.38	6.94	0.34
Axis Multi Asset Allocation Fund	1,303	17.01	8.72	11.48	14.22	12.14	10.96	0.13
Motilal Oswal Multi Asset Fund	110	16.18	10.41	8.40	—	—	6.36	0.21
CRISIL Hybrid 35+65 – Aggressive Index		20.95	13.62	14.28	14.58	13.00	9.38	0.24

The securities quoted are for illustration only and are not recommendatory.
Returns are on a rolling basis and in %. Direct Plan-Growth option. Those depicted over 1-Yr are compounded annualised. Risk ratios are calculated over a 3-year period assuming a risk-free rate of 6% p.a.
Data as of September 11, 2024
(Source: ACE MF, data collated by PersonalFN)
Please note, this table only represents the best-performing funds based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme-related documents carefully before investing. Past performance is not an indicator for future returns. The percentage returns shown are only for indicative purposes.

HDFC Multi-Asset Fund’s near-term performance record seems encouraging. In the last 2-year, 3-year, 5-year period, the fund outpaced the benchmark by around a percentage point but it has trailed the category average. Its past performance over the longer 7-year period may be irrelevant given its previous debt-oriented portfolio that it held until May 2018.

On risk-reward parameters, HDFC Multi-Asset Fund’s volatility is lower than the benchmark and is among the lowest in the category. Its Sharpe Ratio (0.34) signifying risk-adjusted returns is higher when compared to the benchmark but trails many of its prominent peers.

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

What is the investment strategy of HDFC Multi-Asset Fund?

Classified under the Multi-Asset Allocation Funds category, HDFC Multi-Asset Fund aims to invest in a diversified portfolio of equity and equity-related instruments, cash, debt, gold-related instruments, hybrid securities, and derivatives based on prevailing market conditions. Accordingly, the fund manager can increase the equity exposure when market valuations are attractive and will prune down the equity exposure by increasing exposure to other assets when equity markets get expensive or experience volatility.

HDFC Multi-Asset Fund invests 65% to 80% of its assets in equities with the flexibility to invest across market caps. It seeks to invest in companies that have reasonable growth prospects, sound financial strength, sustainable business model, and are available at acceptable valuations. The scheme also aims to generate income through Arbitrage opportunities.

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 (including derivatives, Sovereign Gold Bonds, etc.). The scheme may also invest in the hybrid securities viz. units of REITs and InvITs for diversification.

What are the top portfolio holdings in HDFC Multi-Asset Fund?

Holding in (%) as of August 31, 2024
(Source: ACE MF, data collated by PersonalFN) 

HDFC Multi-Asset Fund usually holds around 65% of its assets in equities. As of August 31, 2024, the fund held a fairly large portfolio of 71 stocks with the top 10 stocks together constituting around 30.5% of its assets. HDFC Bank is currently the top holding in the portfolio having an allocation of about 5.5% followed by Axis Bank, ICICI Bank, Mahindra & Mahindra, and United Spirits, among others. Notably, 4 out of the top 10 stock holdings in the fund’s portfolio belong to the Banking & Finance sectors.

Names like Hindustan Aeronautics, Bharti Airtel, Axis Bank, ICICI Bank, Bharat Electronics, L&T, Adani Ports & SEZ contributed immensely to the fund’s performance in the last 2 years. It also benefitted from its holdings in ITC, Infosys, Oracle Financial Services, NTPC, SBI, Bharat Petroleum, Sun Pharma, HCL Technologies, United Spirits, The Great Eastern Shipping Company, etc.

HDFC Multi-Asset Fund’s portfolio is fairly diversified across Defensive, Cyclical, and Sensitive sectors. Banking & Finance top the list of allocation with a combined exposure of 22%. Consumption, Auto, Infotech, Pharma, Engineering, and Telecom are among the other prominent sectors in the fund’s portfolio.

The debt allocation in HDFC Multi-Asset Fund’s portfolio consists of moderate to high rated corporate debt instruments (6% of its assets) and sovereign rated government securities (7.4% of its assets). HDFC Multi-Asset Fund also held 10.7% of its assets in Gold ETFs and 2.5% in REITs & InvITs.

Is HDFC Multi-Asset Fund suitable for my investment goals and risk tolerance?

While HDFC Multi-Asset Fund has a long-term track record of around 19 years, its near-term track record of 5 years under the current mandate is more relevant which looks encouraging. The fund showcased reasonable growth in the current bull phase and also managed to limit the downside risk in the 2020 bear phase. Despite a drastic change in its investment mandate in 2018, the fund has performed fairly well post recategorization, and is expected to do so in the future as well.

HDFC Multi-Asset Fund holds a well-diversified portfolio consisting of various assets classes. The portfolio is rebalanced on a monthly basis after assessing equity market valuation. It can prune the equity exposure when equity markets are expensive or volatile, and significantly increase the equity allocation when markets are trending in an attractive valuation zone. This strategy enables the fund to reduce portfolio risk during uncertain markets and participate in the recovery phase post-correction, thereby generating decent risk-adjusted returns for its investors.

HDFC Multi-Asset Fund is suitable for investors looking for diversification across equity, debt, and gold for the conservative portion of their portfolio with an investment horizon of at least 3 years.

Watch this video to find out the best Multi-Asset Allocation Funds of 2024:

Note:  This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Registration granted by SEBI, Membership of BASL and certification from NISM no way guarantee performance of the intermediary or provide any assurance of returns to investors.

This article first appeared on PersonalFN here