Investing in India’s top hybrid mutual funds: Advantages, risks and historical performance

Hybrid mutual funds have emerged as a popular investment option in India, offering investors a balanced approach to risk and return. These funds combine equity and debt securities in a single portfolio, catering to various risk profiles and investment goals. In this article, we will explore the benefits, risks, and historical performance of hybrid funds in India.

What are hybrid mutual funds?

Hybrid mutual funds are investment vehicles that invest in a mix of asset classes, including equity, debt, gold, and real estate investment trusts (REITs) & Infrastructure Investment Trusts (InvITs). By diversifying across different asset classes, hybrid funds aim to provide investors with a balanced investment strategy that can potentially offer both growth and stability.

Some of the top-performing hybrid funds in India include:

  1. Quant Multi Asset Fund
  2. ICICI Prudential Thematic Advantage Fund (FOF)
  3. Quant Absolute Fund

Performance, results, and financial data of the mentioned funds

Quant Multi Asset Fund:

  • Performance:
    • 1-year return: 49.19%
    • 3-year return: 102.93%
    • Since launch: 460.59%
  • Financial Data:
    • AUM: ₹1,829.08 Crores
    • Latest NAV: ₹135.181 (as of May 7, 2024)
  • Portfolio:
    • Sectors: Energy, Financial, Metals & Mining, Healthcare, Technology
    • Top Holdings: Reliance Industries Ltd., JIO Financial Services Ltd., Adani Power Ltd.

ICICI Prudential Thematic Advantage Fund (FOF):

  • Performance:
    • Returns ranging from 1.67% to 38.15% over different time periods
  • Financial Data:
    • Expense Ratio: 0.54% (below category average)
    • Fund Size: 2.28% of total investment in the category
  • Portfolio:
    • Invests predominantly in equity and equity-related instruments across various asset classes

Quant Absolute Fund:

  • Performance:
    • Specific performance data not available
  • Financial Data:
    • Financial details (AUM, NAV, returns) not available

These funds offer investors a mix of growth potential and risk management through diversified portfolios across different asset classes. Investors should consider their investment goals and risk tolerance before choosing a fund for their portfolio.

Advantages of investing in hybrid mutual funds

  1. Diversification: Hybrid funds spread risk across multiple asset classes, reducing portfolio volatility.
  2. Active Risk Management: Fund managers actively manage risk through portfolio diversification and asset allocation.
  3. Caters to Various Risk Profiles: Hybrid funds offer varying levels of risk tolerance, suitable for investors with different risk appetites.
  4. Buying Low and Selling High: Fund managers rebalance the portfolio to adjust asset allocation, selling high and buying low.
  5. Automatic Rebalancing: Investors benefit from automatic portfolio rebalancing by the fund manager.
  6. Optimal Diversification: Hybrid funds provide diversification through a single fund, mitigating volatility to some extent.
  7. Downside Protection: Investing in a mix of assets can help reduce downside volatility, depending on the fund’s equity exposure.

Risks associated

  1. Market Risk: Hybrid funds are exposed to fluctuations in economic conditions, interest rates, regulatory changes, and investor sentiment.
  2. Security-Specific Risk: Individual securities within the fund may face default risk or credit rating downgrades.
  3. Liquidity Risk: Limited liquidity can impact the fund’s ability to sell assets when needed.
  4. Inflation Risk: There is a risk of loss in the purchasing power of investments due to rising consumer prices.
  5. Loan Financing Risk: Investors using loans to finance investments face risks related to borrowing costs and interest rate changes.
  6. Non-Compliance Risk: Fund managers’ failure to comply with laws, regulations, or internal policies can affect fund performance and investor interests.
  7. Manager’s Risk: The fund’s performance depends on the expertise and strategies of the fund manager.

Hybrid mutual funds in India have proven to be a balanced investment option, combining the growth potential of equity with the stability of debt. With active risk management, diversification, and the ability to cater to various risk profiles, hybrid funds have demonstrated favorable historical performance. However, investors should be aware of the associated risks, such as market risk, liquidity risk, and manager’s risk, before making investment decisions. By understanding the benefits and risks of hybrid funds, investors can make informed choices and diversify their investment portfolios effectively.

Disclaimer: The information provided in this article is for educational and informational purposes only. It should not be considered as investment advice or a recommendation to invest in any particular mutual fund or asset class. Past performance is not indicative of future results, and investors should conduct their own research and consult with a financial advisor before making any investment decisions. Investing in mutual funds involves risks, including the possible loss of principal invested.