Hybrid Mutual Funds: All You Need to Know About Hybrid Mutual Funds

Investors eyeing a mix of different asset classes One can consider investing in hybrid funds in the same scheme. They often invest in a single fund that combines different asset classes – equities, gold and fixed income – to optimize Return,

What are Hybrid Funds?
This is a category of mutual fund that invests in more than one asset class. These schemes typically combine equity and debt, while some also include gold and REITs.

What is the advantage of Hybrid Fund?
in the range of, fund manager rebalances portfolio Based on the objective of the scheme and does not require any action from the investors and this helps in maintaining the asset allocation. Hybrid funds help retail investors to buy a single fund instead of buying two or multiple funds. The fund manager actively manages risk by combining non-correlated asset classes.

They diversify across multiple asset classes with the aim of optimizing returns with low risk. Financial planners believe that combining assets with low correlation to each other can reduce portfolio risk, and therefore recommend hybrid funds. These funds can provide solutions to conservative, moderate and aggressive investors. There are equity-oriented schemes for risk takers and debt-oriented schemes for those who avoid risk and arbitrage funds for investors looking for stable returns.

Types of Hybrid Funds

As per regulatory guidelines, there are six categories of hybrid funds:

One)
Aggressive Hybrid Funds: Invests between 65% to 80% of its assets in equities and the rest in debt and money market instruments.

b)
Conservative Hybrid Fund: Invests between 75% and 90% of its assets in fixed income securities and the rest in equities.

C)
Balanced Advantage or Dynamic Asset Allocation Fund: Valuations on a pre-determined internal investment model and invests in a mix of equities and debt based on market conditions.

D)
Multi Asset Allocation Fund: Invests at least 10% in at least 3 asset classes – usually equity, debt and gold – and changes its allocation depending on market conditions.

I)
Arbitrage Fund: Simultaneously buy stocks in the cash market and sell in the futures market to earn a spread.

F)
Equity Saving Fund: Invests in equity, debt and arbitrage opportunities in the cash and derivatives equity markets, with equity and arbitrage accounting for 65% of the portfolio.