There are very few MACFs in India considering the paucity of asset classes to choose from and the multitude of tax implications. MACF is a relatively new asset class in India and hence we will have to give it more time to take off in a bigger way. However, there are a few key challenges that MACFs face in the Indian context:

· First is the problem of choice of assets available. Fund managers can get substantial exposure to equity and debt. On the commodities front, it is only possible to get exposure to gold. In other markets, MACFs have access to investing in silver, industrial commodities, crude oil, real estate etc. A bigger real asset basket will make MACF more meaningful for investors.

· Most fund managers in India understand equity and debt with a lot of depth. However, not many are really comfortable with the nuances of hard commodities. That could be an impediment to asset allocation.

· There is an ambiguity in classification. Currently, these MACFs are classified as debt funds and not as equity funds. This takes away the advantage that equity funds enjoy in terms of concessional capital gains tax treatment as MACF gains will be treated as long term capital gains only if held beyond 3 years.

· Currently, an equity fund will be tax free if it is held beyond 1 year (long term) and taxed at a concessional rate of 15% if held below 1 year (short term). In case of MACFs, the long term definition is increased to 3 years and also the tax rates on long term and short term capital gains are higher.

To begin with it is more a question of availability of asset classes and an ambiguous tax regime that is holding back MACFs. Also, in India assets like realty and gold have really underperformed in the last few years. As a result, that explains the massive surge of liquidity flows into equity SIPs that we get to see these days. It must be said that absence of choice and unfavourable tax treatment has limited the rapid growth of MACF. But it is surely a product that can add value to individual investors from a risk management perspective.