Edelweiss Nifty Large Midcap 250 Plus 8–13 yr G-Sec 70:30 Index Fund will be India’s first aggressive hybrid index fund. Long-term readers may know that we have discussed the need for such hybrid index funds for a while now. The question is: does this new offering (currently in its NFO period) meet investors’ needs? Does it meaningfully offer something new to warrant interest in it?
See our earlier articles on the subject: why we badly need an aggressive hybrid index fund! (Oct 2022). We are still waiting for an Aggressive Hybrid Index Fund Oct 2025. Is there a factor index that is consistently less risky than broad-based indices? Oct 2025.
Edelweiss Nifty LargeMidcap250 Plus 8-13 yr G-Sec 70:30 Index Fund (hereafter referred to as Edelweiss 70:30 Index Fund) will track the made-to-order Nifty LargeMidcap 250 Plus 8-13 yr G-sec 70:30 Index, which will invest 70% in Nifty LargeMidcap250 (TRI) and 30% in Nifty 8-13 yr G-Sec with monthly rebalancing.
What interested investors should know straight off the bat:
This is not a one-fund portfolio. You cannot invest in just this fund and assume you have a diversified, risk-managed portfolio and do not have to worry about portfolio rebalancing. As mentioned several times before, equity-oriented hybrid funds are also equity funds. They will offer equity-like returns (both the + and -ve sides of it) with marginally lower risk. You still need an adequate fixed income to properly diversify your portfolio.
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Nifty LargeMidcap250 is distinctly different from indices like Nifty 50, Nifty 100, Nifty 200 and Nifty 500. These are weighted by free-float market capitalisation and are all large-cap oriented. See: Nifty 50 or Nifty 500, which index fund should I choose?
The NIfty LargeMidcap 250 has an “aggregate weight of large cap stocks and mid cap stocks is 50% each and are reset on a quarterly basis.” That is, it has a significant mid cap stock weight than a market-cap-weighted fund. This increases the risk during periods when the mid cap segment is down (which is periodic).
Let us take a look at how the Nifty LargeMidcap 250 Plus 8-13 yr G-sec 70:30 Index has evolved since inception.
The hybrid index is similar to the Nifty 500 TRI with lower drawdowns (fall from peak) and occasional outperformance.
This is also evident in the 5-year and 10-year rolling returns.
The lower volatility of the hybrid index is evident in the 10-year rolling standard deviation.
Next, we see that the drawdown (the fall from a peak) is typically lower for the hybrid index.
So the Nifty LargeMidcap 250 Plus 8-13 yr G-sec 70-30 Index has a Nifty 500 TRI-like return profile with lower drawdowns and lower volatility. But since it is also an equity index, it is necessary to choose the hybrid index, even though one could opt for the simpler (and certainly easier to pronounce) Nifty 500 TRI. It is up to the investor to decide. We are not too enthusiastic.
We next compare the Nifty Hybrid index with the CRISIL Hybrid 35+65 – Aggressive Index (which has 65% of the BSE 200 TR and 35% of the CRISIL Composite Bond Index).
The mid cap weight in Nifty LargeMidcap 250 Plus 8-13 yr G-sec 70-30 Index offers the potential to outperform compared to the CRISIL fund, but also comes at the cost of higher volatility and drawdowns.
Should you invest in Edelweiss Nifty Large-Midcap250 Plus 8–13 yr G-Sec 70:30 Index Fund?
- It makes no sense for investors who already have a few funds to consider this. It would add clutter.
- Even for a new investor, it can only be an equity fund, and they will have to invest in fixed income separately and manage the portfolio. The risk is too high otherwise, even if the 70% equity were only large caps.
- Since its reward profile is similar to the Nifty 500, and since one needs separate fixed income anyway, a Nifty 500 index fund would be a simpler choice, as noted above.
- The 35% mid cap weight gives us pause. It is likely quite risky to hold during market downturns and may not meet investors’ expectations of a “hybrid fund”. I can appreciate why they chose Largecap 250 instead of Nifty 500 or Nifty 200. They wanted to make it more attractive. Most investors are unlikely to appreciate associated risks.
In summary, while the launch of the Edelweiss Nifty LargeMidcap250 Plus 8–13 yr G-Sec 70:30 Index Fund is a step in the right direction, we are not enthused enough to invest in it or recommend it. It is best to wait for a large-cap-oriented hybrid fund. especially for older investors who would appreciate the value of large-cap-like returns at lower risk (than this offering).
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