Can a Mutual Fund change the asset allocation while deploying funds of investors?

Yes, a mutual fund can change the asset allocation while deploying funds of investors, subject to certain conditions and regulatory requirements.

Mutual funds are required to follow the investment objective and asset allocation mentioned in their scheme documents. However, mutual funds have the flexibility to change the asset allocation based on the market conditions and other factors that affect the performance of the scheme.

Mutual funds can change the asset allocation in two ways:

    Active asset allocation: Some mutual funds follow an active asset allocation strategy, where the fund manager has the flexibility to change the asset allocation based on the market conditions and the fund manager's investment outlook. Active asset allocation involves higher risks as it requires timely and accurate decisions based on market events.

    Dynamic asset allocation: Some mutual funds follow a dynamic asset allocation strategy, where the asset allocation is automatically adjusted based on pre-defined rules or algorithms. Dynamic asset allocation strategies can help in maintaining the desired risk profile and provide better diversification.

However, any changes in the asset allocation should be done in compliance with the regulatory requirements and in the best interest of the investors. Mutual funds are required to inform the investors about any changes in the asset allocation, and the reasons for the changes, through regular communication and disclosure. It's always advisable to review the scheme documents and consult with a financial advisor before investing in any mutual fund.