Beyond ForexJan 27, 20265 Min

Rise of Multi-Asset Portfolios in an Unstable World

A completely different and new level of uncertainty exists in today’s world economy. Due to increasing tension between countries in terms of politics, rising inflation rates, and economic policies, investors have been forced to rethink their methods of building wealth. This is exactly what is accelerating the rise of multi-asset portfolios.

Multi-asset portfolios use multiple asset classes for investment purposes through a global investing strategy called asset allocation. As of mid-2025, total global assets under management reached a historic high of $147 trillion. The largest growth came from those investors who use multi-asset allocation to create a stable portfolio in times of volatile markets.

Why Multi-Asset Portfolios are Growing at Unprecedented Rates

Investors who earlier put their money in only one type of security are increasingly diversifying into multi-asset portfolios. These investors are now spreading their money across different types of assets, including the following:

• Stocks
• Bonds
• Commodities
• ETFs

₹4,982 crores were invested in just one month, September 2025, which is an increase of 41%. The total amount invested throughout the year thus far was ₹28,971 crores. This is driven by high-net-worth investors who understand that investing across multiple asset classes will provide better long-term returns than investing solely in equities due to market volatility.

• Shift Away from Pure Stock Funds: Investors are transitioning out of equity-only funds as the returns have been poor and highly volatile. The objective is to build a diversified investment portfolio with stock, bond, and commodity investments to get higher returns on their money when adjusted for risk.
• Performance of Gold and Silver: The gold and silver assets have returned over 50% in 2025. Investors are using multi-asset funds to get exposure to these inflation hedges without having to manage individual commodity portfolios.
• Affluent Investors are Driving this Trend: High-net-worth individuals are leading this movement as they realize that asset allocation has a greater impact on long-term returns than selecting an individual stock. They are therefore investing their capital in professionally managed diversified strategies.​
• Efficient Professional Rebalancing: The advantage of multi-asset funds is that fund managers can dynamically rebalance them. They can make tactical shifts from one asset class to another without causing an investor to pay capital gains taxes on the sale of their position.
• Easy Access to Different Asset Classes: The benefit of multi-asset funds is that they offer investors exposure to different asset classes. It includes real estate investment trusts (REITs), international equities, and arbitrage strategies within a single portfolio. Thereby, making it easier for investors to create an investment portfolio.

What is Powering the Boom in Multi-Asset Investing?

• Increased Market Volatility: The high frequency of world shocks, whether due to geopolitical confrontations or inflationary bursts, has compelled investors to pursue resilient portfolio structures.
• Erosion of the Traditional Correlations: The traditional 60/40 equity-bond model has failed, with the two asset classes tending to move together in times of crisis.
• Need for Inflation Hedging: Multi-asset portfolios of commodities, real estate, and other assets are more effective in protecting against the increasing prices.
• International Monetary Policy Changes: The unpredictable interest rate conditions have rendered portfolios that are heavy in fixed-income less appealing, and this has led to portfolio diversification.
• Innovations in Financial Technology: Digital platforms and ETFs have now made a variety of asset classes accessible to a broader range of investors than previously.
• Emergence of Passive and Hybrid Strategies: Investors now have the ability to combine passive index exposure and active asset allocation to achieve greater efficiency and cost control.

Benefits of Portfolio Diversification and Asset Allocation

Asset allocation is the way investors decide where to allocate their money among different asset classes. A traditional approach to diversifying a portfolio is by investing in stocks, bonds, commodities, and real estate.

Gold: Small Share, Big Impact

Adding only 2.5% to a portfolio resulted in an increase of approximately 12% in the Sharpe ratio (risk-adjusted returns). It has no negative impact on the anticipated returns from the other allocations of the portfolio. Gold prices tend to rise when the stock market is declining. It is a safe-haven asset that offers a hedge against inflation.

Resilience of the 60/40 Portfolio

The most well-known diversified portfolio model is the "60/40" strategy. This model consists of 60% allocated to stocks and 40% to bonds. In historical terms, the diversified portfolio model, or "60/40" model, has performed very well, particularly during periods of market turmoil.

This model declined 16% in 2022 but then rebounded to post a 29.7% cumulative return as of September 2024. It has produced an average annual return of approximately 6.9% per year for the last 10 years. It has been consistent with its long-term average return, despite the volatility in the marketplace.

Multi-Asset Funds Shine in India

India’s multi-asset funds are increasingly standing out as a safer, smarter choice, with inflows jumping 41% to ₹4,982 crore in September. While the top performing funds, i.e., DSP multi asset allocation fund (India), delivered a total return of 5.08%. The ability to achieve higher returns with less volatility than traditional equity-only portfolios further supports the strategy’s success in helping investors meet their objectives at a time of great need for stability.

Investing in a Volatile Market

The geopolitical shock will have a very significant impact on all of us as we see the risks of 1% in developed markets and 2.5% in emerging markets. Russia-Ukraine tensions can be expected to last for months and increase risk premiums and uncertainty.

A diversified portfolio strategy can have benefits. Multi-asset portfolios are an example of this benefit. It offers a level of tactical flexibility that allows investors to switch between different asset classes as needed. Investor confidence has been shown through these types of investments.

Investment Trends Reshaping Portfolios in 2025

Here are the investment trends that are reshaping the portfolios in 2025:

1. The Great Convergence of Asset Classes

Active and traditional managed investment products will now be able to invest together through a common approach. It will create an estimated $6-10.5 trillion in investment flow into private/public portfolio solutions such as infrastructure and private credit. It will also provide democratized access for high-net-worth investors to this type of investment.

2. Exchange-Traded Fund (ETF)

In major markets like the U.S, active ETFs accounted for 37% of all investment inflows into ETFs by investors in 2024. However, only 7% of the total assets are under management by the same category of investment products. It represents a change in how investors are investing their funds.

3. Growing Popularity of Passive and ESG Investing

Investors are increasingly attracted to index funds or ETFs due to their cost-effective method of gaining exposure to markets. They are directing more capital towards ESG (Environmental/Social/Governance) initiatives by investing in sustainable assets. This can also include REITs and commodities as part of their overall investment strategies.

4. Active Management through Artificial Intelligence

Robo-advisers and artificial intelligence (AI) have enabled the creation of new forms of asset allocation. It allows for the creation of multi-asset portfolios with the ability to be changed dynamically based on the objectives of the investor. These solutions have the potential to reduce volatility and increase the risk-adjusted returns of the investment.

Conclusion

The multi-asset portfolio has an advantage over the other strategies with respect to providing better risk-adjusted performance. This is due to the flow increase of 41% in the number of assets under management. It is also because the total number of assets under management is increasing by 10% to $147 billion.

Discipline is the key to successful investing during times of uncertainty. Winners of this economic and political climate will understand how to embrace complexity and build portfolios that will perform well regardless of the scenario.

Disclaimer: The information provided in this article is for educational and informational purposes only and should not be considered financial, investment, or trading advice.