Large cap funds versus Multi Asset Allocation Funds

29 Jan 2026 , 12:34 PM

LARGE CAP FUNDS VERSUS MULTI ASSET ALLOCATION FUNDS

With the rise of alternate asset classes, investors have a choice across large cap funds and hybrid funds like multi cap funds. While large cap funds are pure equity funds with focus on the large cap stocks in the Nifty 100, the multi asset allocation funds (MAAF) look at other asset classes too like debt, gold, silver, REITs, etc. The idea is that you get a more elegant diversification of risk by spreading your money across asset classes. After all, asset classes like gold and silver have either a low correlation or negative correlation with equities. This makes diversification more meaningful.

To understand how to make this decision, we will look at large cap funds and multi-asset allocation funds in terms of flows, AUM, and returns across different time frames. There cannot be a blanket decision in financial planning and asset allocation and it has to be customized to the unique needs of the individual investor. That must be kept in mind; in terms of return requirements, risk appetite, liquidity needs, and tax status. Let us start off by looking at flows into large cap funds and MAAFs.

FLOWS INTO LARGE CAP FUNDS IN LAST 1 YEAR

The table below captures the net flows into large cap funds (equity) on a monthly basis over the last 1 year. We also look at the significance ratio by measuring the monthly and annual flow as a percentage of the net AUM. Let us first look at Large Cap Funds.

Monthly Data	Net Flows (₹ Crore)	AUM (₹ Crore)	Flow Ratio
Nov-25	1,639.80	4,18,524.98	0.39%
Oct-25	971.97	4,10,156.51	0.24%
Sep-25	2,319.04	3,95,093.32	0.59%
Aug-25	2,834.88	3,89,982.59	0.73%
Jul-25	2,125.09	3,91,762.73	0.54%
Jun-25	1,694.33	3,97,470.47	0.43%
May-25	1,250.47	3,83,666.59	0.33%
Apr-25	2,671.46	3,74,519.71	0.71%
Mar-25	2,479.31	3,59,775.39	0.69%
Feb-25	2,866.00	3,35,387.55	0.85%
Jan-25	3,063.33	3,54,365.83	0.86%
Dec-24	2,010.98	3,58,671.88	0.56%
Data Source: AMFI

The large cap funds have seen subdued net inflows in the last one year as most of the equity flows gravitated to sector funds, mid and small cap funds, as well as to multi-caps and flexi-cap funds. If one were to look at the total net inflows into large cap funds in the last 1 year, it stood at ₹25,927 Crore, with a monthly average of ₹2,161 Crore.

Let us turn to significance of these flows. As a share of net AUM, the monthly flows into large cap funds averaged a flow ratio of 0.58% and an annual flow ratio of 6.19%. This is measured by net inflows as a percentage of the final net AUM. While this is a signal of tepid flows, it also shows that large cap funds got most of the AUM accretion from price moves.

FLOWS INTO MULTI ASSET ALLOCATION FUNDS (MAAF) IN LAST 1 YEAR

The table below captures the net flows into multi-asset allocation funds (MAAF) on a monthly basis over last 1 year. We also look at significance ratio by measuring the monthly and annual flow as a percentage of the net AUM. Let us first look at the MAAF story.

Monthly Data	Net Flows (₹ Crore)	AUM (₹ Crore)	Flow Ratio
Nov-25	5,314.86	1,57,266.67	3.38%
Oct-25	5,344.19	1,51,071.71	3.54%
Sep-25	4,982.21	1,40,416.72	3.55%
Aug-25	3,527.91	1,32,103.62	2.67%
Jul-25	6,197.22	1,28,426.74	4.83%
Jun-25	3,209.97	1,23,584.50	2.60%
May-25	2,926.80	1,18,153.73	2.48%
Apr-25	2,105.75	1,13,009.41	1.86%
Mar-25	1,670.34	1,07,094.50	1.56%
Feb-25	2,228.45	1,02,137.72	2.18%
Jan-25	2,122.85	1,03,811.58	2.04%
Dec-24	2,574.72	1,03,320.91	2.49%
Data Source: AMFI

Clearly, multi-asset allocation funds (MAAF) has shown robust net inflows in the last one year; and this can be attributed to the smart performance of MAAFs; thanks to the rally in gold and silver. If one looks at total net inflows into MAAFs in the last 1 year, it stood at ₹42,205 Crore, with a monthly average of ₹3,517 Crore.

Let us turn to significance of these flows. As a share of the net AUM, the monthly flows into MAAFs averaged a flow ratio of 2.76% and an annual flow ratio of 26.84%. This is measured by net inflows as a percentage of final net AUM. This is partially due to the stellar performance put up by MAAFs, and also because the AUM levels are relatively lower.

HOW HAVE LARGE CAP FUNDS AND MAAFS PERFORMED?

Let us first look at how the top 8 large cap funds performed on 5-year returns?

Large Cap Fund Scheme Name	Return (%) 1-Year	Return (%) 3-Years	Return (%) 5-Years
Nippon India Large Cap Fund	9.32	20.19	21.10
ICICI Prudential Large Cap Fund	11.18	18.71	18.58
HDFC Large Cap Fund	7.84	16.51	17.89
Invesco India Large cap Fund	6.00	18.71	17.25
Tata Large Cap Fund	9.54	16.21	16.99
Mahindra Manulife Large Cap Fund	10.38	16.23	16.58
Kotak Large Cap Fund	9.18	16.88	16.34
Bandhan Large Cap Fund	8.28	18.71	16.25
Data Source: AMFI

While the 1-year returns on large cap funds have been erratic, even the longer-term returns have been quite volatile. The lack of consistency across time frames is a cause for worry for investors. Only funds with 5-year track record are considered for these rankings. Large cap funds delivered average returns of 7.68% over 1 year, 16.17% CAGR over 3 years, and 15.48% CAGR over 5 years. Let us now turn to the performance of MAAFs.

Multi Asset Allocation Fund Scheme Name	Return (%) 1-Year	Return (%) 3-Years	Return (%) 5-Years
Quant Multi Asset Allocation Fund	17.65	22.94	27.43
ICICI Prudential Multi-Asset Fund	18.78	20.22	22.59
Nippon India Multi Asset Allocation Fund	20.72	22.20	18.28
Tata Multi Asset Allocation Fund	16.59	17.57	17.16
UTI Multi Asset Allocation Fund	11.51	20.92	15.97
SBI Multi Asset Allocation Fund	19.68	19.54	15.85
HDFC Multi-Asset Allocation Fund	14.23	16.08	14.70
Axis Multi Asset Allocation Fund	16.17	15.70	13.11
Data Source: AMFI

Unlike large cap funds, the returns on MAAFs have been more predictable and robust across different time frames. To a large extent, returns were largely influenced by exposure to gold and silver, the two top performing asset classes this year. Only funds with 5-year track record are considered for these rankings. Multi-Asset Allocation Funds (MAAFs) delivered average returns of 17.61% over 1 year, 19.40% CAGR over 3 years, and 18.14% CAGR over 5 years. MAAFs have done better across all time frames, compared to large cap funds.

INVESTOR TAKEAWAYS: LARGE CAP FUNDS VS MAAFS

In the last one year, MAAFs appear to have done a lot better than the large caps.

1. Not only have MAAFs generated better returns over 1 year and 5 years, they have also got much better flows coming. Often, these two factors are closely related.
2. In terms of consistency of returns across different time frames, it is MAAFs that have done much better than the large cap funds.
3. The outperformance of MAAFs over longer and shorter time frames, is largely on account of the presence of gold and silver ETFs in MAAFs.
4. The presence gold and silver has ensured that the MAAF portfolio is more derisked compared to a pure large cap portfolio; improving risk adjusted returns.
5. If investors want to make a choice, they must remember that gold and silver have long and substantial drawdowns once they make a peak.

If you look at returns over different time frames at the current juncture, MAAFs have done much better than large cap funds. However, for it to replace large caps as a portfolio idea, it would depend on the unique features of the individual financial plan.

LLM Summary For a long time, large cap funds were the first port of call for investors looking to realize their financial plan. While some have shifted to multi-cap funds for better alpha prospects, the new approach is to look at multi-asset allocation funds as a large cap proxy. The outperformance of MAAFs in the last year or so is more due to the stellar rally in gold and silver. The year 2025 saw gold rallying by over 70% and silver rallying by over 160%. This is the beast calendar year for precious metals in the last 46 years. In the last one year, MAAFS have not only received strong investor flows, but have also performed better and more consistently across time frames. In contrast, large cap funds lost flows to mid-caps, small-cap funds, sector funds, and allocation funds. A word of caution before investors make an “apples to oranges” comparison between large cap funds and MAAFs. The latter is prone to larger drawdowns and longer bear markets, compared to large cap funds. Despite diversification, MAAFs can be volatile!