In this edition of the fund performance report, we review HDFC Hybrid Equity Fund. In a baffling and messy response to the SEBI categorisation rules, HDFC decided to close both its balanced funds, HDFC Balanced and HDFC Prudence and merge them with unknown funds!
From June 1st 2018, HDFC Balanced and its AUM merged with HDFC premium multi-cap and then renamed HDFC Hybrid Equity Fund. HDFC Prudence also met a similar fate and became a balanced advantage fund. HDFC Hybrid Equity Fund currently has an AUM of Rs. 17,192 Crores.
Disclaimer: Fund performance reports present return and risk analysis of a fund with representative benchmarks and not investment recommendations. It must be expressly understood that the data below reflect only past performance and is in no way an indication of future performance. Our investment recommendations can be found here: Handpicked List of Mutual Funds (PlumbLine).
Disclosure: HDFC Hybrid Equity is part of my retirement portfolio. For details, see Fourteen Years of Mutual Fund Investing: My Journey and lessons learned.
We find out how consistently the Fund has performed wrt Nifty 100 TRI and CRISIL 65:35 Aggressive Hybrid Index. We will use three metrics to analyze performance consistency versus benchmarks. Analysis such as this can be found for 350+ equity funds in our monthly mutual fund screener.
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1 Rolling return outperformance consistency: the fund returns are compared with category benchmark returns over every possible 3Y,4Y, and 5Y period. Higher the outperformance consistency, the better. Suppose 876 fund returns were compared with 876 benchmark returns, and the fund has beaten the benchmark 675 times. The consistency score will be 675/876 ~ 77%.
Three years
| Metric | Nifty 100 TRI | Crisil6535 |
| No of rolling return entries Index (3 Years) | 1626 | 2263 |
| No of rolling return entries Fund (3 years) | 1626 | 2263 |
| No of times the fund has outperformed the index (3 years) | 702 | 1483 |
| rolling return outperformance Consistency Score (3 years) | 43% | 66% |
Four years
| Metric | Nifty 100 TRI | Crisil6535 |
| No of rolling return entries Index (4 Years) | 1382 | 2019 |
| No of rolling return entries Fund (4 years) | 1382 | 2019 |
| No of times the fund has outperformed the index (4 years) | 702 | 1133 |
| rolling return outperformance Consistency Score (4 years) | 51% | 56% |
Five years
| Metric | Nifty 100 TRI | Crisil6535 |
| No of rolling return entries Index (5 Years) | 1132 | 1672 |
| No of rolling return entries Fund (5 years) | 1132 | 1672 |
| No of times the fund has outperformed the index (5 years) | 646 | 1059 |
| rolling return outperformance Consistency Score (5 years) | 57% | 63% |
It is just about average to above-average performance. Which is not too shabby, considering spectacular outperformance does not last forever.
2 Upside performance consistency over every possible 1Y,2Y,3Y,4Y, 5Y: Higher the better. A score of 70% means, 7 out of 10 times, the Fund performed better than the category benchmark when the benchmark was moving up. This is a measure of reward. It is computed from rolling upside capture data (see link below).
| Metric | Nifty 100 TRI | Crisil6535 |
| upside performance consistency (3 years) | 46% | 97% |
| upside performance consistency (4 years) | 49% | 96% |
| upside performance consistency (5 years) | 47% | 98% |
The fund generally tends to do well when the hybrid index is on the way up.
3 Downside performance consistency over every possible 3Y,4Y, 5Y. Higher, the better. A score of 60% means, 6 out of 10 times, the Fund performed better than the category benchmark when the benchmark was moving down. This is a measure of risk protection. It is computed from rolling downside capture data. Read more: An introduction to Downside and Upside Capture Ratios.
| Metric | Nifty 100 TRI | Crisil6535 |
| downside protection consistency (3 years) | 96% | 65% |
| downside protection consistency (4 years) | 100% | 69% |
| downside protection consistency (5 years) | 100% | 67% |
Downside protection wrt Nifty 100 is not a fair comparison as the benchmark does not have any bonds, so we discount that.
Curiously HDFC Hybrid Equity tends to favour upside capture (doing better than the hybrid index when the latter is moving up) to downside capture (doing better than the hybrid index when the latter is going down). However, on its own, the downside, protection consistency is reasonably good. Not many funds can replicate this behaviour.
In summary, HDFC Hybrid Equity has displayed unspectacular but “reasonably acceptable” performance wrt a hybrid index. The fund is suitable for mature investors who prefer a quiet, average or above-average performer to a short-lived star.
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