Multi-Asset vs Flexi-Cap: Gold lift helps multi-asset funds' returns, flexi-caps maintain 10–13% range

Selecting the right mutual fund has become an increasingly strategic decision for Indian investors seeking to balance growth, stability and risk. As markets cycle through volatility driven by shifting interest rates, geopolitical tensions and sector-specific swings, two fund categories—multi-asset allocation funds and flexi-cap funds—are drawing heightened scrutiny for their contrasting approaches to diversification and portfolio management.

Multi-asset funds gain in 2025

Multi-asset allocation funds, which invest across at least three asset classes such as equities, debt and commodities, continue to appeal to investors seeking smoother returns across market cycles. By spreading risk and periodically rebalancing allocations, these funds aim to deliver balanced, risk-adjusted outcomes without requiring investors to actively manage their own asset mix.

Data from the current lineup shows a wide range of strategies and performance profiles. Near-term returns for these funds vary from –0.78% to +0.46% over one month, reflecting short-term fluctuations. However, their strength becomes more apparent over longer periods. Three- and six-month returns for many offerings fall between 8% and 11%, signalling supportive market conditions for diversified portfolios. One-year results remain robust for leading schemes: Aditya Birla Sun Life Multi Asset Allocation Fund posts returns of roughly 18.6%, while its Multi-Asset Omni FoF variant delivers 16.8%.

Long-term consistency is a differentiator. The Omni FoF shows 18.9% over three years, 17.1% over five, and 13.6% over ten—illustrating how diversified portfolios can cushion volatility while capturing growth.

The category, however, remains uneven in terms of size. While established funds manage substantial assets—Aditya Birla Sun Life’s flagship multi-asset fund holds nearly Rs 5,000 crore—newer or specialised funds remain smaller, with AUM ranging from Rs 20 crore to Rs 260 crore. Strategic approaches also vary: some adopt active allocation, while others track passive indices to maintain lower costs.

A notable driver of recent outperformance has been commodity exposure, particularly gold, which surged amid global uncertainty. This multi-asset advantage has helped several funds outpace flexi-cap and traditional equity funds over the past year.

Flexi-cap funds amid market swings

Flexi-cap funds, while equity-only, offer managers complete freedom to move between large-, mid- and small-cap stocks. This flexibility has proven valuable in 2025, a year marked by volatility and an 8% mid-year correction. Despite the turbulence, most large flexi-cap funds matched or beat the Nifty 500 TRI, aided by tactical shifts such as increasing cash positions, trimming overvalued stocks and rotating into resilient sectors like IT and consumer goods.

Value Research data indicates that 8 of the 10 largest flexi-cap funds delivered 10–13% returns in the year ending October 2025, outperforming the benchmark’s roughly 8%.

Short-term returns across the broader flexi-cap and thematic dataset show stable gains: 1% to 3% over one month and 4% to 5% over three months. Longer-term performers also stand out, with the 360 ONE Focused Fund registering 16.8% (3-year) and 19.7% (5-year) returns.

Investor behaviour has evolved accordingly. Flexi-caps gained favour over multi-caps—whose mandatory small-cap exposure increased risk during a weak mid-cap phase—as investors focused more on cash buffers, rolling returns and volatility metrics.

Striking the Right Balance

While multi-asset funds offer convenience and resilience through diversification, their preset asset allocation may not precisely match individual investor needs. Flexi-caps provide equity-driven growth with tactical flexibility but carry higher volatility.

With multi-asset funds benefiting from gold-driven tailwinds and flexi-caps proving nimble in turbulent markets, investors face a nuanced choice—one that hinges on risk appetite, time horizon and the desire for manager-driven versus automated diversification.