Aggressive Hybrid Funds: How have they fared in the last year?

A trailing one-year performance report on aggressive hybrid funds. We compare them with diversified equity funds like large cap, multicap, large and mid cap funds.

Aggressive Hybrid Funds How have they fared in the last year

Published: October 26, 2019 at 11:48 am

Last Updated on

The performance of aggressive hybrid funds (previously known as balanced funds) over the past year is compared with diversified equity funds like large caplarge and midcap and multi-cap funds. We also report the latest portfolio summary of aggressive hybrid (agg -hy) funds.

Let us begin with the portfolio summary starting from the lowest-rated bonds. The credit rating profile of agg-hy funds is often ignored. The NAV fluctuations due to the large stock exposure drown out the NAV movement due to credit rating changes and interest rate movements.

It is important for investors to study and understand the credit rating profile of the agg-hy category and avoid risky debt if they wish to. That said, the exposure to risky debt will typically be small and manageable in established funds with a healthy AUM.

Since agg-hy funds are anyway recommended only for long-term goals as a replacement for diversified equity funds, especially large cap, this credit rating risk is acceptably small.

These articles explain the benefits of this category.

Portfolio summary of aggressive hybrid (agg-hy) funds

Agg-Hy Funds with BBB / BBB+ / BBB- rated bond exposure (%) (Sep 2019)

Nippon India Equity Hybrid Fund11.51
Baroda Hybrid Equity Fund0.89
UTI Hybrid Equity Fund0.46
Sundaram Equity Hybrid Fund0.45
SBI Equity Hybrid Fund0.03

Agg-Hy Funds with AA / AA+ / AA- rated bond exposure (%) (Sep 2019)

Franklin India Equity Hybrid Fund21.87(!!)
ICICI Pru Equity & Debt Fund16.45
Baroda Hybrid Equity Fund10.43
UTI Hybrid Equity Fund10.06
Sundaram Equity Hybrid Fund9.96
IDBI Hybrid Equity Fund8.99
Tata Hybrid Equity Fund7.08
Aditya Birla SL Equity Hybrid ’95 Fund6.96
SBI Equity Hybrid Fund5.93
DSP Equity & Bond Fund5.57
LIC MF Equity Hybrid Fund5.47
BNP Paribas Substantial Equity Hybrid Fund5.33
L&T Hybrid Equity Fund3.08
Principal Hybrid Equity Fund2.25
Axis Equity Hybrid Fund2.16
Nippon India Equity Hybrid Fund2.04
HDFC Hybrid Equity Fund(Adjusted)1.93
BOI AXA Mid & Small Cap Equity & Debt Fund1.66
Kotak Equity Hybrid Fund1.4
Mirae Asset Hybrid Equity Fund0.99
IDFC Hybrid Equity Fund0.08

Agg-Hy Funds with the highest (top 10) cash and cash equivalent holdings(%) (Sep 2019)

Edelweiss Aggressive Hybrid Fund30.91
Mahindra Hybrid Equity Nivesh Yojana23.63
Canara Rob Equity Hybrid Fund12.52
PGIM India Hybrid Equity Fund9.13
Shriram Hybrid Equity Fund9.02
Mirae Asset Hybrid Equity Fund8.90
BNP Paribas Substantial Equity Hybrid Fund7.56
Nippon India Equity Hybrid Fund6.31
Indiabulls Equity Hybrid Fund6.15
UTI Hybrid Equity Fund5.86

Agg-hy funds with the highest (top 10) equity exposure(%) (Sep 2019)

JM Equity Hybrid Fund86.52
PGIM India Hybrid Equity Fund86.39
Aditya Birla SL Equity Hybrid ’95 Fund80.80
Motilal Oswal Equity Hybrid Fund80.62
Kotak Equity Hybrid Fund79.83
BOI AXA Mid & Small Cap Equity & Debt Fund79.64
Tata Hybrid Equity Fund77.85
BNP Paribas Substantial Equity Hybrid Fund76.37
HSBC Equity Hybrid Fund76.21
Baroda Hybrid Equity Fund75.90

Agg-hy funds with the highest (top 10) Gilt (Sov) holdings (%) (Sep 2019)

Quant Absolute Fund24.95
Motilal Oswal Equity Hybrid Fund13.59
Mirae Asset Hybrid Equity Fund12.22
HDFC Hybrid Equity Fund(Adjusted)8.54
BOI AXA Mid & Small Cap Equity & Debt Fund8.40
IDFC Hybrid Equity Fund8.14
DSP Equity & Bond Fund7.93
LIC MF Equity Hybrid Fund7.40
Tata Hybrid Equity Fund6.57
UTI Hybrid Equity Fund5.87

Agg-hy funds with only Sov holding (plus cash) for the debt component (%) Sep 2019

  • Quant Absolute Fund

Agg-hy funds with only cash/cash equivalent holding for the debt component (%) Sep 2019

  • Edelweiss Aggressive Hybrid Fund

FD is treated as a “cash equivalent”.

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Agg-hy funds with only A1,A1+,A1-,AAA and Sov holdings (plus cash) for the debt component (%) (Sep 2019)

Quant Absolute Fund
Motilal Oswal Equity Hybrid Fund
Mahindra Hybrid Equity Nivesh Yojana
Indiabulls Equity Hybrid Fund
Canara Rob Equity Hybrid Fund
Shriram Hybrid Equity Fund
HSBC Equity Hybrid Fund
PGIM India Hybrid Equity Fund
JM Equity Hybrid Fund
Essel Equity Hybrid Fund
Invesco India Equity & Bond Fund
Edelweiss Aggressive Hybrid Fund

Performance analysis of aggressive hybrid funds

Agg-hy vs benchmarks

Over the last one year (as on 25th Oct 2019),  the standard category benchmark, CRISIL Hybrid 35+65 – Aggressive Index returned 13.3%. The following 14 funds (out of 31) fared better.

The Nifty 50 returned 14.94%. The top 11 funds in this list outperformed the Nifty (the last three which did not is marked red). The S& P BSE 200 returned 11.6%.

BNP Paribas Substantial Equity Hybrid Fund(G)-Direct Plan22.73
Motilal Oswal Equity Hybrid Fund(G)-Direct Plan22.35
DSP Equity & Bond Fund(G)-Direct Plan21.69
Axis Equity Hybrid Fund(G)-Direct Plan20.67
LIC MF Equity Hybrid Fund(G)-Direct Plan17.97
SBI Equity Hybrid Fund(D)-Direct Plan17.83
Kotak Equity Hybrid Fund(D)-Direct Plan17.03
Canara Rob Equity Hybrid Fund(G)-Direct Plan16.75
Invesco India Equity & Bond Fund(G)-Direct Plan15.72
Sundaram Equity Hybrid Fund(G)-Direct Plan15.41
Essel Equity Hybrid Fund(G)-Direct Plan15.02
Quant Absolute Fund(G)-Direct Plan14.58
Mirae Asset Hybrid Equity Fund(G)-Direct Plan14.15
Shriram Hybrid Equity Fund(G)-Direct Plan13.72

Agg-hy vs Large and Mid cap funds

The median return of the large and mid cap category is 14.1%. This means about half the funds in this category (11/23) have a better return than the median. These are the funds. Ten out of 31 Agg-hy funds have a return above the large and mid cap median.

Sundaram Large and Mid Cap Fund(G)-Direct Plan19.9
Tata Large & Mid Cap Fund(G)-Direct Plan19.8
Mirae Asset Emerging Bluechip(G)-Direct Plan18.1
Kotak Equity Opp Fund(G)-Direct Plan17.9
DSP Equity Opportunities Fund(G)-Direct Plan17.8
Invesco India Growth Opp Fund(G)-Direct Plan17.8
Axis Growth Opp Fund(G)-Direct Plan17.6
Edelweiss Large & Mid Cap Fund(G)-Direct Plan16.9
LIC MF Large & Midcap Fund-(G)-Direct Plan16.9
Essel Large & Midcap Fund(G)-Direct Plan16.8
BOI AXA Large & Mid Cap Equity Fund(G)-Direct Plan15.1

Agg-hy vs Multicap funds

There are 34 funds in the multicap category. Out of which, these 19 funds did better than the category median of 13.7%. This median is a bit lower than the large and mid cap category and 14/31 agg-hy funds have fared better than this number.

Axis Multicap Fund(G)-Direct Plan26.43
DSP Equity Fund(D)-Direct Plan25.26
JM Multicap Fund(G)-Direct Plan24.64
Canara Rob Equity Diver Fund(G)-Direct Plan18.76
Essel Multi-Cap Fund(G)-Direct Plan18.32
LIC MF Multi-Cap Fund(G)-Direct Plan18.15
Kotak Standard Multicap Fund(G)-Direct Plan18.12
SBI Magnum Multicap Fund(G)-Direct Plan17.59
Mahindra MF Badhat Yojana(G)-Direct Plan17.07
PGIM India Diversified Equity Fund(G)-Direct Plan16.82
Motilal Oswal Multicap 35 Fund(G)-Direct Plan16.69
BNP Paribas Multi Cap Fund(G)-Direct Plan16.20
Tata Multicap Fund(G)-Direct Plan15.76
Edelweiss Multi-Cap Fund(G)-Direct Plan15.23
IDBI Diversified Equity Fund(G)-Direct Plan14.29
Parag Parikh Long Term Equity Fund(G)-Direct Plan13.93
Union Multi-Cap Fund(G)-Direct Plan13.83
Baroda Multi-Cap Fund(G)-Direct Plan13.53
UTI Equity Fund(D)-Direct Plan13.52

Agg-hy vs Large cap funds

There are 32 funds here and these 16/32 have a greater return than the median of 15.7%. Only 9 of the 31 agg-hy funds have done better than the median.

Axis Bluechip Fund(G)-Direct Plan26.94
BNP Paribas Large Cap Fund(G)-Direct Plan24.14
LIC MF Large Cap Fund(G)-Direct Plan21.61
Canara Rob Bluechip Equity Fund(G)-Direct Plan21.39
IDBI India Top 100 Equity Fund(G)-Direct Plan20.78
DSP Top 100 Equity Fund(G)-Direct Plan19.80
Sahara Growth Fund(G)-Direct Plan18.00
Kotak Bluechip Fund(D)-Direct Plan17.89
L&T India Large Cap Fund(G)-Direct Plan17.85
Indiabulls Blue Chip Fund(G)-Direct Plan17.65
SBI BlueChip Fund(G)-Direct Plan17.18
Tata Large Cap Fund(G)-Direct Plan16.81
HSBC Large Cap Equity Fund(G)-Direct Plan16.59
Baroda Large Cap Fund(G)-Direct Plan16.34
Edelweiss Large Cap Fund(G)-Direct Plan16.12
Essel Large Cap Equity Fund(G)-Direct Plan15.92

Summary

The effect of Sensex and Nifty deviating from other indices due to the performance of a handful of stocks is seen in the performance of agg-hy funds too in the last year.  While they have done reasonably well against benchmarks and multi-cap funds, they have failed to shine against large cap and large and midcap funds.

This is not surprising and agg-hy funds should not fret over this. When the market normalises, agg-hy fund performance is likely to pick up. Their long-term record is impressive – Why Aggressive Hybrid (balanced) Mutual Funds score over diversified funds – and there is no reason to doubt them on the basis of this short duration.

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M Pattabiraman author of freefincal.comM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Linkedin
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3 Comments

  1. Hi Pattu,
    Thanks for the post and data re-enforcing the beauty that is the Agg-Hy category 🙂

    Any idea when would a Hybrid Index Fund appear on the scene?
    a: We understand that nobody will push for it but still 🙂
    b: In absence of a Hybrid Index fund, how to get closest to self constructing it? I can’t seem to find Debt Index fund! (to mix and match it with the Equity Index fund)

  2. Hi Pattu,
    Thanks for the detail analysis. Most of the analysis are against Direct Funds. Is it possible to compare against Regular Funds?

  3. Sir, May I ask what are your thoughts about extravagant returns given by these new funds:
    Motilal Oswal Equity Hybrid Fund
    Axis Equity Hybrid Fund

    I am not star rating fan and also can understand reviewing such funds without much of history is impossible for analysts like you but 1-yr performance of such funds are so impressive that one need to take a note of such fund. How one should analyse or decide to invest or not in such new funds?

    Lastly, thanks a lot for opening my eyes by writing on diversified funds vs hybrid funds. I have become fan of agg. hybrid equity fund only because of you! Many thanks for helping me in deciding making agg hy fund as my core fund for retirement.

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