Did MAAFs fall less in the recent market downturn?

Multi-Asset Allocation Funds (or MAAFs) claim to be the all-weather jackets in your investment wardrobe. Come rain or shine—equity rallies or market crashes—they promise to keep you comfortably diversified by juggling equity, debt, gold and even a glint of silver.

But when markets slipped on a banana peel recently, did these funds cushion the fall?

MAAFs 101: The basics you should know

SEBI’s rulebook says that to be called a Multi-Asset Allocation Fund, you must spread your investments across at least three asset classes, with at least 10 per cent in each. Simple enough.

As of April 2025, the average MAAF looked something like this:

• 53 per cent equity – the growth engine
• 23 per cent debt – the stabiliser
• 14 per cent commodities (mostly gold and some silver) – the hedge
• 9 per cent cash & 1 per cent real estate – the extras

The MAAF universe currently includes 43 funds, including Fund of Funds (FoFs). It's a young crowd too, as the majority (27 funds) of them are less than five years old, while 15 funds have a track record spanning over a decade.

Combined, they manage a chunky Rs 1.54 lakh crore, but it’s worth noting that over half of that money sits with just two ICICI Prudential funds - ICICI Prudential Multi Asset Fund and ICICI Prudential Asset Allocator (FoF) Fund.

Some MAAFs also add a global twist by investing overseas, making the portfolio a tad more diversified. The table below lists funds with foreign exposure exceeding 10 per cent.

Did MAAFs cushion the market slide?

The market hit a peak on September 26, 2024, and then took a not-so-graceful dive. By February 28, 2025, the Nifty 500 TRI had tumbled 18.6 per cent.

To see if MAAFs cushioned the fall, we excluded the new kids and focused on 39 funds that were around at least 3 months before the market started falling.

To make sense of it, we grouped them based on how much they fell:

• Dropped less than a third of the Nifty 500’s fall (i.e. <6.2 per cent)
• Fell between one-third and half (6.2 per cent–9.3 per cent)
• Sank more than half of Nifty 500’s fall (>9.3 per cent)

We also checked how these funds were positioned from October 2024 to February 2025 and how much equity, debt and commodities they held during the slide. And once the dust settled, we tracked their recovery since the February lows (though the market hasn’t fully bounced back to its former high).

In the world of MAAFs, it’s simple: More equity, more pain. In contrast, funds that loaded up on debt took a softer landing during the fall. 

That said, when the markets started limping back to normalcy, the higher-debt funds were stuck in slow-mo, while the high-equity daredevils bounced back stronger. Turns out, what saved you on the way down, slowed you on the way up.

What about other market downturns? 

In 2018, SEBI introduced re-categorisation rules that officially established the Multi Asset Allocation Funds category. Since then, we have evaluated their performance across both bullish and bearish market phases, comparing their returns with those of flexi-cap and aggressive hybrid funds in this story.

Some funds nailed the crash and the comeback

We dug deeper to find the MAAFs that didn’t just play defence but also flexed their muscles during the rebound. The filters? Fell less than the category average (–7.6 per cent) during the crash and gained more than average (9.5 per cent) during the recovery.

Here are the six that made the cut:

Golden cushion: Did commodities help?

When it comes to commodities, MAAFs typically add a sparkle of gold—and occasionally a hint of silver—to brighten up their portfolios. But did this golden touch actually help when the markets turned gloomy? We dug into the five most commodity-loaded funds (based on average allocation from Oct-24 to Feb-25) to see if going heavy on the bling helped them dodge the downturn blues.

Four out of the five gold-heavy funds managed to fall less than the average MAAF during the correction—but here’s the twist: two of them also had notably low equity exposure. So yes, gold added some sparkle, but it wasn’t the lone superhero saving the day. The real shield? A lower equity allocation.

In short, the funds that cushioned the blow best didn’t just lean on gold, they leaned away from equity, spreading their bets across debt, commodities and other assets.

The last word

MAAFs, on average, fell just 8.1 per cent during the correction versus 18.6 per cent for Nifty 500 TRI. Clearly, they did their job when the market sneezed. But, as expected, lower equity meant slower recovery—average gains since February lows stood at 9.5 per cent, compared to 14.7 per cent for the index.

Finally, Multi Asset Allocation Funds have shown their strength in cushioning the downside during market corrections. However, this stability often comes at the cost of a relatively muted upside.

Therefore, for long-term wealth creation, higher equity exposure remains essential. Investors should choose based on their risk appetite. Those more risk-averse can consider allocating a portion to MAAFs, while others aiming for stronger growth may be better served by equity-heavy categories.

Also read: Are multi-asset funds worth your money?