The sharp rally in gold prices has acted as a strong performance cushion for multi-asset funds during periods of market volatility. These funds help reduce portfolio concentration risk while ensuring participation across asset classes.
For moderate-risk investors, these funds serve as a middle path between aggressive equity funds and conservative debt options. Investors should maintain a three to five-year horizon and expect returns in the range of 9–11%, with smoother ride quality compared to pure equity funds. The strategy should be to invest systematically and avoid timing individual asset classes.
Nirav Karkera, head, research, Fisdom, says as global uncertainties, geopolitical tensions, and central bank policies drove up demand for gold as a safe-haven asset, funds with a meaningful allocation to gold were able to offset the drag from equities. “This diversification benefit allowed multi-asset funds to deliver more stable returns, helping investors ride through equity corrections with lower overall portfolio risk.”
Rise in gold prices
The sharp rally in gold prices has significantly lifted the performance of multi-asset funds in recent quarters. The metal has yielded 30% in rupee terms over the past year, far outpacing major equity indices like Nifty 50 which saw increased volatility and more muted returns.
Sonam Srivastava, founder, Wright Research, says the recent surge in gold prices has provided a strong tailwind to multi-asset funds. As equities saw phases of turbulence driven by global macro concerns, sticky inflation, and geopolitical tensions, gold offered a hedge and stabiliser in portfolios.
“Many multi-asset funds with 10–20% exposure to gold were able to outperform traditional balanced funds in Q1 and Q2 2025, she says and adds that this diversification helped reduce volatility while cushioning downside risk, thereby enhancing the risk-adjusted return profile of these funds.
Higher allocation to gold
While higher gold exposure has helped in the recent past, allocation decisions should not be based on past returns alone. Around 15% allocation to gold in multi-asset funds can help cushion portfolios during equity drawdowns, especially when bond markets are also uncertain.
Rishabh Nahar, partner, Qode Advisors, says investors should ensure the fund’s gold allocation is not just tactical, but also part of a well-reasoned strategic asset allocation that includes risk management, diversification, and macroeconomic alignment. “What matters more is a disciplined process behind asset allocation rather than tactical overweighting of any one asset.”
Risk-reward perspective
From a risk-reward perspective, multi-asset funds are ideal now because they spread investments across equities, debt, and gold, reducing volatility while capturing growth opportunities. With equity markets uncertain, debt offering stable but modest returns, and gold acting as a hedge, these funds provide balanced exposure without extreme swings.
Soumya Sarkar, co-founder, Wealth Redefine, an AMFI registered mutual fund distributor, says investors should adopt a long-term strategy and avoid frequent switching. “Choose funds with a proven track record and align allocations with your risk profile, conservative investors can prefer higher debt/gold exposure,” he says.
Before investing, individuals should evaluate the fund’s asset allocation policy, whether it is static or dynamic, and assess the experience of the fund manager in navigating cross-asset strategies.
