DSP Mutual Fund's Sahil Kapoor on why this is the best time to invest in multi-asset funds

Sahil Kapoor says that this is the best time to be invested in a multi asset fund.

When it comes to economic growth translating into equity returns. India finds itself in a unique position. Over the last 30 years, a GDP of around 13.3 percent resulted in equity returns of nearly 12.9 percent. But this is not always the case.

Sahil Kapoor, Market Analyst and Head, Product, DSP Mutual Fund, and Kalpen Parekh, MD & CEO, DSP Mutual Fund, recently interacted with the media at the launch of the asset management company’s Multi Asset Allocation Fund.

Talking about the benefits of investing in a multi-asset fund, Kapoor said, “While we are in a bull run currently and equities are giving good returns, there are and will be phases where there have [not] been and will not be any returns. This has been seen multiple times with equity markets.”

“These phases will keep recurring again and again, and in these phases, it makes sense to have exposure to different assets,” Kapoor said.

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Elaborating, Kapoor said, “If you were to look at data, currently we are trading at 19,500, close to a Nifty lifetime high of 19,900. If you invest in markets when they were at a 52-week high, based on back-tested data, the five-year forward returns would have been around 11.8 percent.” On the other hand, he said a multi-asset fund, with less than 50 percent equity allocation “would have given you approximately 12.4 percent returns. Even in the case of an investment made when the markets were closer to a 52-week low, the returns would be around 15.1 percent and 14.1 percent”.

Similarly, he says, when India is trading at the top 30 percentile of valuation based on P/E and P/B, the five-year forward returns “would have been around 9.1 percent and 11.8 percent if you invested in multiple assets. Even when the markets were trading close to a 52-week low, the returns would be 17.4 percent and 14.4 percent, respectively”.

“Today, we are sitting in both these buckets. The Nifty is trading close to a lifetime high. We are also at the top 30 percentile in terms of our valuations. Hence this is a good time to do any kind of multi-asset allocation,” said Kapoor.

Also read: Daily Voice | Smallcaps relatively better placed, not just in India but also globally: DSP MF's Sahil Kapoor

Another reason he cited, is that “we have a 10-year performance winter in gold”.  While gold prices peaked in 2011, as of 2023, gold hasn’t broken its lifetime high. Kapoor said that their analysis shows that there is a probability that gold may enter a new bull market; “We don’t know when.” It makes sense to allocate funds to gold, he noted, especially keeping in mind the market changes that have happened over the last three years. “So, there is a case for it to do well and that is why this is the right time to look at these funds,” he said.

Kapoor was speaking in reference to DSP’s Multi Asset Allocation Fund, which aims to benefit investors and reduce overall risk by diversifying investments between asset classes such as domestic equities, international stocks, debt instruments, gold ETFs, other commodities and ETF & Exchange Traded Commodity Derivatives.

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