Multi-asset funds' AUM grew 487% in 3 years vs 115% for flexi-cap: Should you invest in one or both for diversification?

Multi-asset allocation funds from the hybrid category have grown much faster than flexi-cap funds from the equity category over the past three years, although flexi-cap funds remain larger in terms of AUM and folios.

Multi-asset funds must invest at least 10% each across three or more asset classes, such as equity, debt and gold. However, flexi-cap funds invest at least 65% in equity across large-, mid- and small-cap stocks.

With both categories offering diversification, should investors hold both or choose one? Here's what experts say.

How have two categories grown?

What's driving shift toward multi-asset funds?

Eshaan Lazarus, Founder & CEO, 021 Trade, said that recent returns, diversification and the convenience of holding multiple assets in one fund are likely influencing investor decisions.

Ajay Kumar Yadav, CFPCM, Group CEO & CIO, Wise Finserv, attributed the shift to a combination of diversification, recent performance and convenience.

Sougata Basu, Founder and CEO, CashRich, highlighted that gold and silver outperformed equities in 2025, benefiting multi-asset funds with exposure to these assets. Flexi-cap funds, which do not invest in these assets, missed this rally.

Tanwir Alam, Founder & CEO, Fincart, pointed to a behavioural shift among newer investors who prefer having equity, debt and gold managed within a single multi-asset fund.

Are investors dropping flexi-cap funds for multi-asset funds?

Not necessarily. Multi-asset schemes increased from 13 to 36 in three years, suggesting that much of the category's growth came from new launches and NFOs rather than investors exiting flexi-cap funds, Alam said.

In absolute terms, flexi-cap funds remain significantly larger, with nearly three times the AUM and more than four times the folios of multi-asset allocation funds as of August 2026. However, inflow growth has remained broadly comparable across the two categories.

AMFI’s August data shows no new multi-asset launches, yet the category attracted about ₹3,700 crore, indicating genuine demand for existing schemes. There is some switching at the margin, usually by investors who sat through a flat equity year and want a smoother ride, Basu added.

When does adding multi-asset fund help a flexi-cap investor?

Yadav highlighted that investors with portfolios heavily tilted towards equity and limited exposure to debt or gold may benefit from adding a multi-asset fund.

Look at the multi-asset fund's current allocation, not its name. If the fund is running a high equity share and the investor already holds equity, most of the new money is an overlap. If the investor's portfolio is all equity and the fund is holding 40% in debt and gold, that 40% is the diversification, Basu explained.

Should investors choose both or only one?

Check the combined equity, debt and gold exposure, portfolio overlap, costs, debt quality and allocation limits of both funds, Lazarus shared.

Alam suggested looking at the overall asset allocation rather than the number of funds in your portfolio. Map out your total equity, debt and gold exposure across both funds, and compare it to what your goals actually require. If it's balanced, both can coexist comfortably. If one is duplicating the other, trim it.

“Flexi-cap is primarily a wealth-creation allocation. Multi-asset is primarily a wealth-creation plus asset-allocation solution,” Yadav added.

When can multi-asset funds be a bad choice?

Multi-asset funds may add little if an investor already holds a suitable mix of equity, debt, gold and other assets, such as REITs, and rebalances the portfolio regularly.

They can duplicate existing holdings, making the overall portfolio harder to track. However, they may be useful for investors who want to consolidate investments and delegate asset allocation to a fund manager, Lazarus said.

Who can consider only multi-asset fund?

A multi-asset fund can suit investors seeking a simple, low-maintenance portfolio instead of managing separate equity, debt and gold investments.

“One fund and one SIP can keep things simple, with the asset mix managed by the fund manager,” Basu said.