Hybrid Funds are a type of mutual fund that invests both in equity and debt in varying proportions. These funds use various combinations of debt and equity to provide investors with a regular income from their investments while mitigating risks. There are funds with varying levels of risk to suit almost every investor. Hybrid Funds are a good investment vehicle if you have a very concentrated portfolio and are seeking some diversification. Some of the best Hybrid Funds on the market provide their investors with superior returns while mitigating risks. Here is a list of the best Hybrid Funds on the market today.

1. ICICI Prudential Equity & Debt Fund

Risk Grade: Low

Return Grade: Above Average

Minimum Lump Sum Investment: Rs. 5,000

Minimum SIP Investment: Rs. 100

Expense Ratio: 2.00%

The ICICI Prudential Equity & Debt Fund is an open-ended, actively managed Aggressive Hybrid Mutual Fund that was launched in November 1999 by the ICICI Prudential Mutual Fund House. The fund allocates between 60% to 80% of its assets towards equity and equity-related instruments and between 40% – 49% of its assets towards debt and other money market instruments. As the fund invests a minimum of 51% in equity at any point in time, thereby, always maintaining a majority equity holding, it is considered an Aggressive Hybrid Fund. For the equity component of the fund, it invests in 86 stocks across market sectors and capitalizations. Presently, the fund employs a blend of growth and value styles of investment while investing in equity stocks. The fund carries a large-cap bias. For the debt composition, the fund only takes on high-quality debt instruments rated A1+ or higher that have medium sensitivity to interest rate fluctuations. The fund mitigates interest rate risks by making investments in debt instruments that carry maturity periods between 5 – 7 years. The ICICI Prudential Equity & Debt Fund performs well in bullish markets, outperforming both its benchmark and category but underperforms during bearish cycles. The trailing returns of the fund against its category have been provided in the table below.

Trailing Returns (%) 3-M 6-M 1-Y 3-Y 5-Y
Fund -4.02 -5.19 -5.45 13.03 14.81
Category -1.12 -6.26 -4.22 11.56 13.53

 

2. HDFC Hybrid Equity Fund

Risk Grade: Below Average

Return Grade: Above Average

Minimum Lump Sum Investment: Rs. 5,000

Minimum SIP Investment: Rs. 500

Expense Ratio: 2.05%

The HDFC Hybrid Equity Fund in an open-ended actively managed Aggressive Hybrid Mutual Fund that was launched in January 2013 by the HDFC Mutual Fund House. The allocates between 65% – 80% towards equity and equity related instruments and 20% – 35% towards debt and other money market instruments. As this is a Hybrid Fund, it allocates a sizeable portion of its assets towards debt and is, therefore, considered less risky than a pure equity fund. The HDFC Hybrid Equity Fund performs well during strong bull runs in the market and was, therefore, able to outperform its benchmark and category in 2014 and 2017. The equity portion of the fund is divided among 64 stocks across market sectors, the fund carries a large-cap bias when it comes to equity stocks. For the debt component, the fund invests in medium-quality credit instruments rated AAA or below that carry a moderate sensitivity to interest rate changes. The fund makes such debt investment to boost the regular income an investor gets. The trailing returns of the fund against its category have been provided in the table below.

Trailing Returns (%) 3-M 6-M 1-Y 3-Y 5-Y
Fund -0.66 -4.48 -4.09 13.25 15.68
Category -1.12 -6.26 -4.22 11.56 13.53

 

3. L&T Hybrid Equity Fund

Risk Grade: Below Average

Return Grade: Average

Minimum Lump Sum Investment: Rs. 5,000

Minimum SIP Investment: Rs. 500

Expense Ratio: 2.02%

The L&T Hybrid Equity Fund was launched in January 2011 by the L&T Mutual Fund House, it is an actively managed, open-ended Aggressive Hybrid Fund that allocates a minimum of 65% of its assets towards equity and equity-related securities. The fund employs a growth style of investment while selecting equity stocks, concentrating more on the future potential of stock to perform rather than its current market value. The fund allocates a minimum of 20% of its assets towards debt and other money market instruments to provide investors with a regular income on their investments. The equity component of the fund is spread across 54 stock of primarily large-cap companies and for its debt component, it invests in long-term, high-quality debt instruments. As the debt instruments are long-term they are highly sensitive to interest rate changes. The ideal investment cycle for this fund is 5 years or more. This fund is suitable for investors that have a moderately high risk appetite and long investment horizons of at least 5 years. The trailing returns of this fund against its category have been provided in the table below.

Trailing Returns (%) 3-M 6-M 1-Y 3-Y 5-Y
Fund -3.32 -8.38 -6.83 10.12 14.91
Category -1.12 -6.26 -4.22 11.56 13.53

 

4. Aditya Birla Sun Life Equity Hybrid ’95 Fund

Risk Grade: Average

Return Grade: Average

Minimum Lump Sum Investment: Rs. 100

Minimum SIP Investment: Rs. 100

Expense Ratio: 1.97%

The Aditya Birla Sun Life Equity Hybrid ’95 Fund was launched in February 1995 by the Aditya Birla Sun Life Mutual Fund House, the fund is an open-ended, actively managed Aggressive Hybrid Mutual Fund. The fund takes exposure to equity and equity related instruments anywhere between 50% and 75% and allocates a minimum of 25% towards debt and other money market instruments. The equity component of this fund is spread across 83 equity stocks of predominantly large-cap companies. The fund employs a growth style of investment. For the debt component, the fund invests in high-quality debt instruments rated A1+ or above that have a moderate sensitivity to interest rate changes. The fund does not perform well during bearish market cycles but has the capacity to outperform both its benchmark and category during bullish market cycles. The fund saw its best performance between 1999 and 2000. The trailing returns of this fund against its category have been provided in the table below.

Trailing Returns (%) 3-M 6-M 1-Y 3-Y 5-Y
Fund -2.13 -8.21 -6.1 10.56 14.48
Category -1.12 -6.26 -4.22 11.56 13.53

 

5. SBI Equity Hybrid Fund

Risk Grade: Below Average

Return Grade: Average

Minimum Lump Sum Investment: Rs. 1,000

Minimum SIP Investment: Rs. 100

Expense Ratio: 1.95%

The SBI Equity Hybrid Fund was launched on 31st December 1995 by the SBI Mutual Fund House. The fund is an Aggressive Hybrid Fund that is open-ended and actively managed. As this fund is a Hybrid Equity Fund is it less risky than a Pure Equity Fund. The fund seeks to provide investors with long-term capital appreciation and high liquidity through a mix of debt and equity investments. The fund allocates a minimum of 65% of its assets towards equity and equity related instruments and a minimum of 20% of its assets are allocated to debt and other money market instruments. The equity component of this fund is spread across 57 equity stocks of predominantly large-cap companies and for its debt component the fund invests in long-term debt instruments that are of high quality, rated A1+ or above. The trailing returns of the fund against its category have been provided below.

Trailing Returns (%) 3-M 6-M 1-Y 3-Y 5-Y
Fund 0.35 -4.2 -0.6 11.4 15.35
VR Balanced TRI 1.44 -4.24 3.81 14.27 12.46
Category -1.12 -6.26 -4.22 11.56 13.53

Please note: Aggressive Hybrid Mutual Funds that maintain a minimum equity exposure of 65% are considered Equity Mutual Funds for taxation purposes and will be taxed accordingly. Therefore, returns on investments held for less than a year are taxed at 15%. If an investment is held for more than a year, Long-Term Capital Gains (LTCG) Tax is applicable for returns above Rs. 1 lakh at 10%. LTCG Tax on returns above Rs. 1 lakh is only calculated for the year of redemption and not for every year of investment.

 

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