Before opting for a mutual fund scheme, retail investors often face a dilemma to choose between equity and debt schemes.
Consequently, there are some who opt for hybrid mutual funds that have allocations both to equity and debt instruments.
Among hybrid mutual funds also, there are a number of categories across the risk spectrum ranging from aggressive to conservative, based on the allocation to debt in these schemes.
There are a total of 139 hybrid mutual fund schemes. The maximum number of schemes (31) are offered under the category of balanced hybrid funds which have total AUMs (assets under management) amounting to ₹1.58 lakh crore, shows the AMFI (Association of Mutual Funds in India) data as on April 30, 2023.
This is followed by 29 schemes in the category of dynamic asset allocation funds with total AUMs of 1.96 lakh crore, and 26 arbitrage funds with AUMs of 71,000 crore.
Here we share details on different categories of hybrid mutual funds:
Aggressive hybrid: As the name suggests, these mutual funds are meant for investors with aggressive risk profile. These schemes have 65 to 80 percent assets in equity and equity related instruments, and the remaining 20 to 35 percent in debt instruments.
Balanced Hybrid: These have moderate risk as they invest anywhere between 40 to 60 percent in equity and equity related instruments, while the remaining 40 to 60 percent in debt instruments, as defined by the Sebi’s categorisation of mutual funds in India.
Conservative hybrid: These are meant for highly conservative investors that have an allocation of anywhere between 10 to 25 percent in equity and equity related instruments, and 75 to 90 percent in debt instruments.
Equity savings: These have minimum 65 percent allocation to equity and equity related instruments, 10 percent to debt instruments and some allocation to derivatives which is specified in the SID.
Arbitrage: These funds follow arbitrage strategy with a minimum 65 percent allocation to equity and equity related instruments, as indicated by the SEBI’s categorisation of mutual funds.
Multi Asset allocation: These funds include investment in at least 3 asset classes with a minimum allocation of at least 10 percent in each asset class.
Dynamic asset allocation or Balance Advantage: These are one of the most dynamically managed mutual funds. There is no minimum or maximum cap of investment in equity or debt. Investment in both equity and debt is managed dynamically i.e., 0 to 100 percent in equity and equity related instruments and likewise, 0 to 100 percent in debt instruments as well.