The Role of Asset Allocation in Mutual Fund Portfolio Returns

This study aims to investigate the impact of asset allocation in determining the returns of the mutual fund portfolio in the Indian financial market. This research is based on secondary data collection, which has been accumulated over ten years, ranging from 2015 to 2024. This study has considered the selected large-cap mutual funds, namely HDFC Top 100 Fund, ICICI Prudential Bluechip Fund, SBI Bluechip Fund, Nippon India Large Cap Fund, and Axis Bluechip Fund. Asset allocation is considered one of the most important factors in portfolio management, which includes the allocation of funds among different types of assets, namely equity, debt, and cash, to maximize the returns. This study has utilized statistical tools to check the correlation between the returns of the mutual fund and the asset allocation. The findings of the study show that there is a low positive correlation between the returns of the mutual fund and the asset allocation. This is due to the regulations that require the funds to be invested in the equity market to the maximum extent possible. However, the findings show that the performance of the funds varies due to the expertise of the fund managers, their stock selection, and the sector allocation techniques. This study concludes that although the asset allocation is the base of the portfolio, it is not the key factor in determining the returns of the funds operating in the large-cap segment; however, the expertise of the fund managers is the key factor in achieving high returns.