Hybrid Mutual Funds

Hybrid Mutual Fund's

What are hybrid mutual fund ?

Ans ) Hybrid Mutual funds are an investment fund that is characterized by diversification among two asset classes. These funds typically invests in a mix of stocks (equity), bonds etc. They can also be called as asset allocation funds. Hence these funds are diversified funds which invests in different asset classes depending upon the scheme and offer document. 

Types of Hybrid Mutual Funds

1. Aggressive Hybrid Mutual Fund - It is an open ended scheme investing predominately  in equity and equity related instruments. As the name suggests these are aggressive in nature hence it tries to give more returns so focuses in equity more. Distribution between them is 20-35% in debt and rest in equity.

Examples :  a) SBI Equity Hybrid fund

                      b) Mirae Asset Hybrid Equity fund, etc.

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2. Arbitrage Fund - It is an open ended scheme investing in arbitrage opportunities.(Arbitrage occurs when a security is purchased in one market and simultaneously sold in another market for a higher price) Hence tries to take advantage of difference in price in two different market. 

Examples : a) Edelweiss Arbitrage fund Direct growth 

                     b) Nippon India Arbitrage fund

3. Balanced Advantage hybrid fund or Dynamic asset allocation fund - It is a type of fund where investments is done in equity/debt and is managed dynamically. An open ended dynamic asset allocation fund these funds can invest in a mix of debt and equity. They increase/decrease their allocation to equities and debt depending on their view of stock markets. Typically when valuations are low, they increase equity in their portfolio, and when there is euphoria in the market and very high they try to reduce it.

Examples : a) Edelweiss Balanced advantage fund

                     b) IDFC Dynamic equity fund 

4. Conservative Hybrid fund - As the name suggests these are conservative in nature hence attempts to take less risk and most of the investment are done in debt instruments usually between 75% to 90% and left corpus in equity or stocks

Example : a) Indiabulls Savings income fund

                   b) Baroda conservative hybrid fund direct 

5. Multi Asset Allocation Fund - Investments are done in at least three asset classes with a minimum allocation of at least 10% in each of all three asset classes. It is an open ended scheme investment in ___, ____, ____  (AMC has to be mention the three different asset classes). Asset classes such as : "debt, money market instruments, equity and equity related instruments and gold". They are more hybrid and diversified in nature. 

Examples : a) SBI multi asset allocation fund 

                     b) AXIS triple advantage direct plan growth 

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6. Equity Savings fund - It is an open ended scheme investing in arbitrage, equity and debt fund. It's aim is to generate returns from those three instruments. To retain equity taxation, funds will restricts the fixed income(debt) exposure to 35%. Besides, to reduce volatility and hedge the portfolio, these funds actively use derivative strategies. Minimum hedged and un hedged to be stated in the SID. Asset allocation under defensive considerations may also be stated in offer document.

Examples : a) Kotak Equity savings fund

                     b) Edelweiss equity savings fund

[Note : Examples are based on high returns from last 3 years no promotional examples]

Top 5 Balanced / Hybrid 

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Desclaimer : Before investing in any mutual fund make sure you go through a deep research or else ask a financial advisor or make urself highly educated to take finance decisions. I do not owe any responsibility for any action taken by anyone through this blog. All the actions shall be done qt your own risk. 
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