The Multi-Asset Paradox: Why Investors Choose or Avoid Diversified Funds

Abstract

Multi-Asset Allocation Funds have gained prominence as investment vehicles designed to balance risk and return through diversification across multiple asset classes. Despite their theoretical advantages, investor adoption remains inconsistent, giving rise to what may be described as the multi-asset paradox. This study examines the factors influencing consumer perception of multi-asset allocation funds, with particular emphasis on perceived risk–return trade-off, professional fund management, investor awareness, diversification benefits, product complexity, and transparency concerns. Primary data were collected using a structured questionnaire, and reliability was assessed through Cronbach’s Alpha. Hypotheses were tested using regression analysis. The results indicate high internal consistency among measurement constructs and reveal that diversification benefits, awareness levels, transparency, and perceived risk–return trade-off significantly and positively influence consumer perception. While professional management enhances investor confidence, perceived product complexity adversely affects perception, highlighting a key barrier to adoption. The findings suggest that improved transparency, investor education, and simplified product communication can enhance investor acceptance of multi-asset funds, thereby bridging the gap between theoretical appeal and actual investment behavior.