Gold And Silver Rally Push Multi-Asset Funds Ahead

Multi-asset funds are doing better than many pure equity or debt funds this year. The rally in gold is a big reason.

According to data from Value Research, the multi-asset fund category has delivered an average return of about 10 % year-to-date. That performance surpasses most debt funds and many equity schemes. Only a few equity or sector funds have done better.

Why Gold and Silver Helped

From January this year, domestic prices of gold jumped ~51.2 %. Silver soared ~65.7 %. These gains gave funds that held precious metals a boost.

Some fund houses increased their allocations to gold and silver early enough to benefit. For example, Samco MF, DSP MF, and Invesco MF posted returns in the range of 14–15.2 %. Their bold positioning in metals paid off.

Industry players say that as the dollar may weaken, safe-haven demand for precious metals could stay strong. The metals act like a hedge when equity markets wobble.

Strategy: Dynamic Allocation Matters

A key to success has been dynamic allocation — not locking into one class, but shifting between equities, fixed income, overseas assets, and commodities.

Aparna Karnik, a fund manager at DSP MF, said their funds kept lower equity exposure when valuations looked stretched. They leaned more into commodities and overseas exposure. As valuations in domestic equity improve, they may tilt back.

Umesh Kumar Mehta from Samco MF said in bullish gold periods, the fund raised metal exposure to as high as 70 %. At other times, they reduced it. Their current mix: about 50 % in gold, 40 % in equities, 10 % in fixed income.

Other fund houses which underperformed did so in part because they increased equity weight when equities looked cheaper, but missed the metals run. For instance, Shriram MF, HSBC MF, UTI MF lagged.

At UTI, allocation to gold is based on how it performs versus equity. Sharwan Goyal of UTI said gold’s rally has been strong, but over long cycles it’s volatile and not steady. He sees gold as a tool to diversify risk, not overexpose.

Risks and What to Watch

Though precious metals have surged, there are risks:

• Prices could correct after a strong run.
• Equities may bounce back, making heavy metal exposure disadvantageous.
• The metal rally may be driven by sentiment, not fundamentals — so it could reverse.
• Overreliance on gold makes a fund vulnerable if other assets outperform.

Fund managers caution that metal allocation must be flexible, not rigid. Karnik advised maintaining exposure to precious metals, but being mindful of volatility.

What This Means for Investors

For retail or institutional investors, this trend offers some lessons:

1. Don’t stick to just one asset class.
   Mixing assets helps cushion against downturns.
2. Be alert to market signals.
   When equity valuations are high, shifting toward commodities can help.
3. Use gold sensibly.
   It is more of a risk-diversifier than a growth engine.
4. Watch the macro environment.
   Currency moves, interest rates, demand for safe havens all impact metals.
5. Understand fund strategy.
   Check how dynamic the fund is in switching allocations.

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