Last Updated on December 29, 2021 at 5:08 pm
The first thing that strikes you about Mirae Asset Hybrid Equity Fund is its expense ratio. Regular plan 1.98%. Direct plan 0.33%. That is a clear invitation to sell (the regular plan) and invest (in the direct plan). This gap will narrow as the direct AUM increases. In this review let us take a look at its portfolio history and how it has fared against benchmarks and peers.
I had reviewed this fund in Nov 2018, but a much more in-depth analysis is now possible. Launched in July 2015, the fund can invest between 65% to 80% of its assets in equity with a large cap tilt. The remaining debt portion will also be actively managed as per interest rate cycles.
Benchmarked against CRISIL Hybrid 35+65 – Aggressive Index (Benchmark), the fund has an AUM of 2589 Crores -hence the invitation to invest via the expense ratio. The fund has the fourth-highest AUM among Miraes equity-oriented funds. The AUM has doubled since Feb 2019. So that is something to keep an eye out for. During turbulent market periods, aggressive hybrid funds get sold and get bought more.
Mirae Asset Hybrid Equity Fund: Overlap with other Mirae Funds
Neelesh Surana and Sudhir Kedia manage the Equity Portion & Mahendra Jajoo the
Debt Portion. Since Surana also manages (1) Mirae Asset Large Cap Fund since May 2008; (2) Mirae Asset Emerging Bluechip Fund since May 2010; (3) Mirae Asset Tax Saver Fund since Nov 2015, portfolio overlap among these funds becomes important.
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The following percentage overlap was obtained with this free overlap tool: Compare five fund portfolios for common stocks!
These are the common stocks.
The message here is, do not go overboard on these funds. Just hold one of these or you would just be buying more of the same. Do not assume this will reduce significantly. This was the overlap in Nov 2018.
Expense Ratio and AUM History
The expense ratios of the direct and regular plans are shown below along with the AUM growth (blue line, right axis). look at that huge drops in the orange curve. That is the AMC baiting the direct crowd.
Now, let us look at the AUM break up (in Lakhs) and growth during the months marked by the arrows. Source: AMFI
This is the growth rate over these months.
Clearly the direct AUM has grown much more because of the low expense ratio. Bizarre to see the increase in direct dividend option! Lowering the expenses and allowing the AUM to grow and then gradually increase it seems to the plan and norm across AMCs. See for example SBI Bluechip Fund Review: Can this outperform Nifty 100?
Do not get carried away by the low direct plan expenses! It will increase soon!
Asset Allocation History
The average equity allocation since inception is about 72% and there is not much change across market conditions.
Market cap allocation history
The fund has a large cap tilt as advertised.
Market Cap History of Mirae Asset Hybrid Equity Fund
Bond Maturity profile History
The fund has plenty of freedom in the debt part. So its can pick bonds of any duration. Since it holds a good chunk of longer duration bonds, it will be sensitive to interest rate movements, although this will be much smaller than the stock volatility.
Bond Type History
The bulk of the bond portfolio has good credit rating.
Bond issuer History
The fund has considerable flexibility in picking bonds. However, considering the good rating profile seen above, the chances of running into credit trouble is reasonably managed. Because of the low exposure in such funds, a default may not even be noticed in the volatility due to stock price movements.
Performance Analysis of Mirae Asset Hybrid Equity Fund
Finally the rolling return analysis with benchmark indices and peers. We only have a three-year rolling returns history to work with.
Fund vs Benchmarks
In its short history, the fund has done well against Nifty. This is again due to the benefit of bonds exposure and monthly rebalancing. This return is obtained at a lower risk than the Nifty but at higher risk than its own primary benchmark.
Fund vs peers
So far Mirae Hybrid Equity Fund has outperformed the peers shown above. However, it is also the most volatile.
Summary: Should You Invest in this?
Mirae’s Hybrid fund has performed quite well in its short history. It has outperformed Nifty at about 30% lower risk. It is however volatile than the standard aggressive hybrid fund or other popular peers. Also, the low expense ratio can result in sudden AUM surges as seen above. This can affect performance although the aum is fairly on the lower side.
You can invest if (1) you do not hold any of Surana’s other funds; (2) have no other funds in the aggressive hybrid fund; (3) have truly long term goal – either 10 years plus or only a small amount for goals between 5-10 years.
However, do keep expectations low. Do not expect the direct plan expenses to remain low and the past performance to repeat. If you hold any of its peers, do not exit those in favour of this fund.
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