Franklin Templeton launches multi-asset fund to curb volatility-led investor mistakes

Franklin Templeton launches multi-asset fund to curb volatility-led investor mistakes

Franklin Templeton India has launched the Franklin India Multi Asset Allocation Fund (FIMAAF), pitching it not as a tactical response to market volatility, but as a long-term core holding aimed at delivering better risk-adjusted outcomes

The open-ended hybrid scheme — open for subscription between July 11 and 25, 2025 — will invest across equity, debt, and commodities (including gold and silver). While multi-asset funds are not new to the market, Franklin’s positioning is distinct: this fund isn’t about timing or chasing returns — it’s about staying invested despite volatility.

“If this was about chasing upside, we’d have launched a pure equity product,” said Avinash Satwalekar, President of Franklin Templeton India. “Instead, this is designed to reduce the heartburn of volatility and help investors remain disciplined,” he added.

The strategy leans on a key investment metric: Sharpe ratio — or returns per unit of risk. Franklin’s back-tested data shows that while multi-asset funds rarely top charts in bull runs, they consistently rank near the top over longer periods, with lower drawdowns.

Internally, the fund is seen as a strategic extension of balanced advantage funds (BAFs). Instead of allocating only between equity and debt, FIMAAF adds a third layer — commodities — based on a proprietary model that blends macroeconomic signals with Franklin’s global insights. Gold and silver will play a structural role, not as alpha generators but as volatility buffers.

“When equity valuations are elevated and macros uncertain, adding uncorrelated assets gives portfolios more resilience,” said Janakiraman Rengaraju, CIO – Emerging Markets Equity, India.

The equity portion of the fund will follow Franklin’s QGSV framework — Quality, Growth, Sustainability, Valuation — and remain sector- and market cap-neutral, mirroring the broader index split between largecaps and mid/smallcaps (roughly 70:30).

Rengaraju explained that in case of a tactical reduction in equity exposure, say from 65 to 50 percent, the rebalancing would likely happen in largecap stocks that have derivative liquidity, potentially increasing mid- and smallcap weight on the margin. It’s a technical nuance, but one that reflects real-world constraints in managing such portfolios.

The debt component will be focused on AAA-rated securities, actively managed for maturity, safety, and liquidity. On the fixed income side, the fund will rely on Franklin’s in-house research instead of merely external ratings, which the CIO says is critical in identifying early risks.

The fund will be benchmarked to a custom mix: 65 percent Nifty 500, 20 percent Nifty Short Duration Index, and 15 percent commodities (gold, silver, and the iCOMDEX Composite Index).

Rengaraju was explicit that macro volatility isn’t viewed as a threat but an opportunity. “We added new names to the portfolio during the January–February correction when valuations became reasonable,” he said, stressing that the best investments often come during short-term fear.

He flagged metals as a sector to watch cautiously due to overcapacity risks from China, and warned of stock-specific pockets, such as hospitals, where valuations may have run ahead of growth.

“FY26 earnings might look soft, especially for banks, but if you average FY26 and FY27, large caps could deliver 12 to 13 percent earnings CAGR. That’s a more rational basis for return expectations,” he said.

The proliferation of funds — passive, thematic, ETFs, FOFs — has led to questions about over-diversification. But Satwalekar dismissed the idea that investor choices are excessive. “If diversification leads to poor returns, investors will self-correct. The bigger issue is that too many people aren’t making informed choices or using proper advice,” he said.

FIMAAF, in his view, fills a gap: a product that can anchor long-term portfolios and smooth out market-led behavioural mistakes, like premature exits or overreactions to drawdowns.