What are conservative hybrid mutual funds?
Conservative Hybrid Mutual Funds are open-ended mutual funds from the hybrid category. They invest in a mix of debt and equity. These funds follow a conservative approach to investing, which implies that most funds are invested in debt funds (low risk), and a little of the remaining corpus is allocated to equities (high risk).
As per SEBI (Securities Exchange Board of India), conservative hybrid funds are mandatorily required to keep their debt exposure between 75 percent to 90 percent, and equity allocation should be between 10 percent to 25 percent. When it comes to debt allocation, a conservative fund can invest in government securities (G- secs), treasury bills (T- bills), bonds or debentures.
How do conservative hybrid mutual funds work?
Conservative Hybrid Mutual Funds follow a conservative strategy of investing by allocating the majority of corpus to fixed income or debt securities and a small portion to the equities. Thus, the returns, as well as the risks from these funds, are limited. The fixed-income securities provide stability in returns and capital protection, whereas the equities provide additional gains from favourable market movements.
When compared to Bank Fixed Deposits, hybrid funds, in general, give higher returns, as there is some equity element present in the asset mix of the hybrid funds. However, it must be noted that conservative hybrid funds are not risk-free funds. This means that investors can lose their money due to various risks that affect these funds. The equity portion of the fund has market risk attached to it, resulting in capital erosion for the investors. Similarly, the fund’s debt allocation may face capital erosion due to credit risk and interest rate risk.
Taxation of conservative hybrid mutual funds
The taxation of a Conservative Hybrid mutual fund is quite similar to that of a pure debt fund. The gains arising from these funds short-term in nature are taxable as per the investor’s respective income tax slab rates. Long-term gains, i.e. gains from funds held for at least three years, are taxable at the rate of 20 percent with indexation benefits.
Who should invest in conservative hybrid mutual funds?
As the fund’s name suggests, conservative hybrid funds are suitable for the traditional investors, i.e. who want stable returns with less risk. Conventional hybrid mutual funds can be a better alternative than a bank FD or pure debt mutual funds. Many risk-averse investors invest predominantly in bank FDs or other debt instruments. If such investors are looking to invest in equities, then conservative hybrid mutual funds can be one of them’s best options. New age investors who are willing to take a little exposure in the equities can also invest in such funds. Further, those near their retirement age, having a low-risk appetite and looking for safe investment avenues, can invest in these conservative hybrid funds.
Investment in conservative hybrid funds can be made through a SIP (Systematic Investment Plan) or a lump sum route.
What are top conservative hybrid mutual funds to invest in?
If you are a conservative investor and feel that these mutual funds are suited to you, here is a list of top conservative hybrid funds that may be considered for investment:
Edelweiss Balanced Advantage Fund
About Fund
The scheme primarily invests in different arbitrage opportunities, equity investments, and equity derivative strategies. Some portion of the scheme are also allocated to debt and money market instruments to balance the risk element.
| Inception Date | January 01, 2013 |
| Benchmark Name | NIFTY 50 Hybrid Composite debt 50:50 Index |
| Fund Manager | Rahul DedhiaBharat LahotiBhavesh Jain |
| Expense ratio | 0.46% |
| Fund type | Open-ended |
| Risk | Very high |
Historical Returns of the Fund (annualised)
| 1-Year | 2-Year | 3-Year | 5-Year | 10-Year |
| 20.12% | 21.90% | 17.72% | 16.12% | 13.31% |
L&T Balanced Advantage Fund
About Fund
The scheme aims to fetch long-term capital growth by setting up and maintaining a diversified portfolio, primarily comprising equity and equity related securities. It also invests a portion of the corpus in debt and money market instruments and also explores arbitrage opportunities in the cash and derivative categories of the equity markets.
| Inception Date | January 01, 2013 |
| Benchmark Name | NIFTY 50 Hybrid Composite debt 50:50 Index |
| Fund Manager | Vihang NaikJalpan ShahPraveen AyathanCheenu Gupta |
| Expense ratio | 0.69% |
| Fund type | Open-ended |
| Risk | Moderately high |
Historical Returns of the Fund (annualised)
| 1-Year | 2-Year | 3-Year | 5-Year | 10-Year |
| 9.81% | 11.69% | 11.07% | 10.12% | 12.28% |
ICICI Prudential Balanced Advantage Fund
About Fund
The scheme aims to provide capital growth and regular income to investors by adopting an investment strategy focused on equity derivatives, arbitrage opportunities and also pure equity instruments.
| Inception Date | January 01, 2013 |
| Benchmark Name | CRISIL Hybrid 50+50 Moderate Index |
| Fund Manager | Manish BanthiaRitesh LunawatIhab DalwaiSankaren NarenRajat Chandak |
| Expense ratio | 0.99% |
| Fund type | Open-ended |
| Risk | High |
Historical Returns of the Fund (annualised)
| 1-Year | 2-Year | 3-Year | 5-Year | 10-Year |
| 15.91% | 13.72% | 13.09% | 12.66% | 13.32% |
Aditya Birla Sun Life Balanced Advantage Fund
About Fund
The scheme aims to generate long-term capital growth and regular income while maintaining a relatively lower volatility. It focuses on investments such as equity & equity linked investments and fixed-income securities to ensure a dynamically balanced portfolio.
| Inception Date | January 01, 2013 |
| Benchmark Name | CRISIL Hybrid 50+50 Moderate Index |
| Fund Manager | Mohit SharmaLovelish SolankiVineet Maloo |
| Expense ratio | 0.58% |
| Fund type | Open-ended |
| Risk | High |
Historical Returns of the Fund (annualised)
| 1-Year | 2-Year | 3-Year | 5-Year | 10-Year |
| 14.69% | 15.44% | 13.36% | 11.75% | 12.43% |
HDFC Hybrid Debt Fund
About Fund
HDFC Hybrid Debt Fund-Growth is a Conservative Hybrid mutual fund scheme from Hdfc Mutual Fund. The scheme aims to generate income/capital appreciation by investing primarily in debt securities, money market instruments and moderate exposure to equities.
| Inception Date | December 26, 2003 |
| Benchmark Name | NIFTY 50 Hybrid Composite Debt 15:85 Index |
| Fund Manager | Shobhit Mehrotra, Srinivasan Ramamurthy |
| Expense ratio | 1.32% |
| Fund type | Open-ended |
| Risk | High |
Historical Returns of the Fund (annualised)
| 1-Year | 2-Year | 3-Year | 5-Year | 10-Year |
| 8.66% | 9.29% | 12.91% | 8.46% | 9.26% |
SBI Debt Hybrid Fund
About Fund
BI Conservative Hybrid Fund Direct-IDCW Monthly is a Hybrid mutual fund scheme from SBI Mutual Fund. The scheme aims to provide the investors an opportunity to invest primarily in Debt and Money market instruments and secondarily in equity and equity related instruments.
| Inception Date | March 24, 2001 |
| Benchmark Name | NIFTY 50 Hybrid Composite Debt 15:85 Index |
| Fund Manager | Mansi Sajeja, Saurabh Pant |
| Expense ratio | 0.57% |
| Fund type | Open-ended |
| Risk | Moderately High |
Historical Returns of the Fund (annualised)
| 1-Year | 2-Year | 3-Year | 5-Year | 10-Year |
| 7.13% | 8.73% | 12.96% | 8.38% | 8.90% |
Conclusion
As investors increasingly fear sudden market crashes due to the economic impact of the Covid-19 pandemic, there is a growing tendency to make panic-based decisions. This, however, damages one’s wealth creation journey. By shifting some of the assets to conservative hybrid funds, an investor can avoid the impact of market falls. Conservative hybrid funds also allow investors to either choose the SIP mode or lump-sum, or a combination of both for investment.
FAQ
Conservative hybrid fund invests mainly in debt instruments with only a small portion of the portfolio allocated to equities. This makes them a safer investment choice as compared to equity-focused funds.
Each investor has individual goals and risk profile. Those looking for a comparatively safer investment option with minimal equity exposure can consider investing in conservative hybrid funds. The overall portfolio composition depends on each investor’s financial goals, investment horizon, and risk preferences.
There are many other debt-focused and hybrid mutual fund schemes that investors can consider alongside conservative hybrid options. Some of them are banking and PSU funds, multi-asset allocation, dynamic bond funds, etc.
Bank FDs offer fixed returns, which may be lower depending on the ongoing interest rates. Conservative hybrid funds, however, may offer higher returns since they invest a small portion of the portfolio in equities while also exploring various arbitrage opportunities.
An investor can easily invest in these funds by downloading and installing the Fisdom app. This app offers users a vast number of fund options to choose from as per personal risk, return, and investment period preferences.
