Kalpen Parekh: Actually, I think we say that over a very long period of time, equity has been proven to be the best asset class, but only for a few countries. In fact, a couple of days back we published one data point for all the emerging market countries since the beginning of 2000. In their local currency accounts their equity markets actually underperformed in gold and this is actually a bit startling.

Now this has some start point and end point bias because 2000, was in a way a bubble peak for emerging markets and then they had sharp currency drawdowns. India has been one of the very few countries where there has been policy stability, there has been macro stability barring few years here and there because of which our currency has remained stable, and we have had good entrepreneurship where profits pools go back to shareholders.

In many emerging market countries, first of all, profit pools are shallow, or not consistently growing and they do not go back to shareholders. So, India has been in a way, an outlier, apart from U.S., where for long periods of time, equities have actually delivered 6 to 7% or rather 5 to 6% extra return over inflation. There’s no point in looking at returns only in macro terms like 15% or 20%, ultimately how much more do we want over inflation is what matters.

So, India and U.S. have delivered very good long-term secular returns for their equity shareholders. But in this journey, this journey is laced with periods of 20 to 40% price falls in between. Every two-three-years there is a 20% price fall. Every seven to eight years, there is a 30 to 40% price fall, the reasons would be different. The reason could be international prices. It could be local prices; it could be currency net corrections. We don’t know and I cannot forecast what the next reason also would be or when the next correction would be.

Now there are two types of investors, one who don’t get affected whatsoever by these corrections, who in fact, enjoy these corrections, who rejoice in these corrections and were able to take advantage of this correction by actually investing more or looking through them. So that’s the first group of investors for whom equity is the best asset class.

There is another group of investors who panic from corrections, who think that when prices are falling, I should get out of the market and actually they end up distracting or hurting their asset allocation or skewing it away from being in equity when prices actually have become cheaper.

So, asset allocation strategies, multi-asset allocation funds are suitable for the second group of investors and if we were to look at the entire universe of investors that we see investing in any asset class or in mutual funds, most of us tend to be the second group where we chase past performance.

There are very few investors who have the temperament or the resilience to live to equity fluctuation and valuations and which is why we feel for people at large asset allocation funds, multi-asset funds, offer a very disciplined way of investing in tomorrow’s winning asset classes and not just in yesterday’s winning asset classes. That is exactly the reason why we believe that till you do not become a pro at equity investing on your own, till you cannot digest fluctuation and volatility on your own, take advantage of multi-asset allocation funds.

Now what does multi-asset mean here, we also are introducing asset class like gold and global stocks in the portfolio and these two asset classes in the long-term have again given returns closer to what Nifty would have given over a full cycle, but they behave many times in opposite direction, they have low or negative correlation.

So, without compromising on the long term, accurate/absolute returns that each of these asset classes give, when you mix them, they actually increase the ability to withstand fluctuations, because they fall much lesser when markets go through sharp drawdowns, but they don’t compromise too much and that is what I do multi-asset funds.