Last Updated on February 11, 2020 at 12:24 pm
We find 8 (out of 16) aggressive hybrid funds managed to consistently outperform a hybrid index, the CRISIL Hybrid 35+ 65 aggressive Index suggesting a need for a hybrid index fund.
We have previously seen how large caps and mid caps have trouble beating respective indices: (1) Only Five Large Cap funds have comfortably beat Nifty 100! (2) Only 6 Midcap Mutual Funds beat Nifty Midcap 150 in the last 5 years (3) Only 3 midcap mutual funds have beat Nifty Next 50 consistently!
Let now find out how aggressive hybrid funds have fared against a hybrid index comprising of S&P BSE 200 (65%) and CRISIL Composite Bond Fund Index (35%). This is the methodology document of the index.
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The normalised index values in ACF MF (a paid mutual fund analysis tool) was used for this study. It is a pity that hybrid indices are not freely accessible in the NSE (although the other indices are).
For this study, we shall consider rolling returns. That is, we shall compare every possible 1,2,3,4 and 5 year return periods possible from 1st Jan 2013 (from the inception of direct plans) to Feb 10th 2020. We shall only consider funds that have enough history to generate 500 or more 5-year rolling return data points.
This is the full list of 16 funds currently classified as aggressive hybrid. It is possible that some of these funds had a different investment mandate in the past. All funds are direct plans
- HDFC Children’s Gift Fund Investment Plan
- SBI Equity Hybrid Fund
- Principal Hybrid Equity Fund
- ICICI Prudential Equity & Debt Fund
- Canara Robeco Equity Hybrid Fund
- DSP Equity & Bond Fund
- Reliance Equity Hybrid Fund
- L&T Hybrid Equity Fund
- Franklin India Equity Hybrid Fund
- Aditya Birla Sun Life Equity Hybrid’95 Fund
- Tata Hybrid Equity Fund
- Baroda Hybrid Equity Fund
- UTI – Hybrid Equity Fund
- HDFC Hybrid Equity
- JM Equity Hybrid Fund
- LIC MF Equity Hybrid Fund
Five years: 14/16 funds have outperformed CRISIL 35:65 with a consistency of 70% or more. For example, Tata Hybrid Equity Fund (direct plan) had got a better return than the index over five years 405 out of 515 times or 79%. We shall refer to this performance consistency.
Three years: Only 8/16 funds managed 70% or more performance consistency!
These eight funds qualify over 3,4 and 5 year periods with 70% or more consistency.
- Principal Hybrid Equity Fund
- HDFC Children’s Gift Fund
- Canara Robeco Equity Hybrid Fund
- SBI Equity Hybrid Fund
- ICICI Prudential Equity & Debt Fund
- DSP Equity & Bond Fund
- Reliance Equity Hybrid Fund
- HDFC Hybrid Equity
This again highlights the need for a low-cost index fund tracking a hybrid index. However, this is unlikely to happen. At the very least, SEBI should mandate all benchmark data is publically available. I was informed these indices can cost several lakhs a year (that is for just a table of date and value!). This is peanuts for AMFI.
Investors should be aware that portals like Value Research use their own hybrid category indices. Using these indices for comparison (and rating) can lead to incorrect results. Considering the presence of a minimum 65% stocks in these funds, Nifty or Sensex can be used as at least a secondary benchmark.