Hybrid and debt mutual funds suffer as investors hastily pull out, AMFI's February data show

The Russia-Ukraine skirmish has cast uncertainty over bond yields resulting in many investors moving their money out of both hybrid and debt funds.

Ultra Short Duration Funds In February 2022 alone, there was a net outflow of ₹1315.04 crores from Ultra Short Duration Funds. For the unversed, these funds are synonymous with low risk though they are deemed slightly riskier than liquid funds. However, they continue to be among the lowest risk categories of schemes to invest in. 

Low Duration Funds  As the name suggests, these funds allow you to invest in selected bonds or debt instruments with an average maturity period between six and 12 months. The net outflow from these funds in February alone was to the tune of ₹4,981.53 crores.

Money Market Funds These are sought-after debt funds that lend to companies for a year. Designed in a way that allows fund managers to extract maximum returns from their borrowing companies while embedding the lowest risks involved. The total outflow from these funds amounted to ₹655.32 crores.

Short Duration Funds Steep crude oil prices and the fear of interest rate hikes by the US Feds are cited among the most probable reasons for investors pulling their money out of these debt funds. These short-duration funds that invest in market securities for one to three years witnessed a tremendous outflow of ₹12,091.88 crores.

Medium Duration Funds The market-linked volatility has shaken fixed-income investors to the core. The possibility of an impending full-fledged war coupled with a rate hike possibility by the US Feds led to an outflow of ₹1061.86 crores in February 2022.  

Medium to Long Duration Funds Unlike the short-duration funds that do not allow investors to park their money beyond three years, you can put your money in the medium-to-long-duration funds that invest in the debt and money market instruments that have an average maturity of between four and seven years. The outflow was no less than ₹2,907.14 crores.

Long Duration Funds Investors found themselves least concerned with the length of these debt market instruments that invest in long-term fixed-income securities. The net outflow was ₹58.16 crores.

Dynamic Bond Funds The hype surrounding a major opportunity to invest in the stock market in near future has led many investors to pull out of these funds that are essential debt market instruments that invest in government securities, corporate bonds, etc. of different durations. These funds lost investors’ money up to ₹1705.25 crores.

Corporate Bond Funds These funds lost the most amount of money as investors, wary of the unpredictability of the Indian economy and how these companies would perform in the long run, pulled out their investments. The net loss shot up to ₹10,218.74 crores.

Gilt Funds These funds were at the receiving end of the constant upheaval in the stock markets as investors vented their ire by pulling out of debt funds that invest primarily in government securities. Though there is no fear of investors losing out due to non-payment of interest or principal amount, the fear of getting affected by interest rate fluctuations resulted in an outflow of ₹464.06 crores.

Gilt Fund with 10-year constant duration Despite not being a very popular form of investment, there was an outflow of ₹19.81 crores from these funds.

Floater Funds Fluctuating interest rates in the country’s economy led to many investors pulling out their investors from floater bonds that pay interest as the economy changes. The outflow of money was huge up to ₹10,322.98 crores.

Conservative Hybrid Funds These funds preferred by most who wish to avail the benefits of investing in equities while looking for the stability that debt funds provide also suffered a setback with fund managers losing up to ₹50.90 crores in February 2022 alone. 

Arbitrage Funds Despite being of low risk in nature, investors made the shift from arbitrage funds to the market hoping to capitalize on the market’s upside movement in the future. The total money from these funds was ₹335.91 crores. 

Gold ETFs Many investors resort to gold investments as the perfect hedge against inflation. However, most acted otherwise by pulling their money out of gold ETFs fearing that the returns from gold may not outperform that of the market. This resulted in a loss of up to ₹248.06 crores.