This is a return vs risk performance review of Mirae Asset Hybrid Equity Fund (previously known as Mirae Asset Prudence Fund) vs Nifty 100 Equal weight Index. Although looking for consistent performance track record while choosing a mutual fund is the logical and natural way to about things, sometimes you may choose to go with your gut instinct (which is how I choose PPFAS). Mirae Asset Hybrid Equity Fund was a fund that I had recommended in one of Bangalore DIY investor meets when it was less than a year old or so.
The reasons were simple. Mirae was relatively a new player with two impressive funds (which continue to do well): Mirae Asset Emerging Bluechip Fund and Mirae Asset India Equity Fund. They do not have too many funds (even now) and I assumed that they will take the performance of a balanced or aggressive hybrid fund (as they are known now) seriously. The equity component of all three funds were (are) managed by the same fund manager (Neelesh Surana). Although I knew nothing about his style (other than the vague statements made in the scheme document), Mirae Asset Hybrid Equity had a large-cap preference but does have the freedom to invest across sectors and market cap. So it seemed like a balanced version of their large-cap fund: Mirae Asset India Equity Fund. You should typically find significant overlap between these two funds.
Using the tool to compare equity mutual fund portfolios, we get:
Perhaps the most important reason was the chance to invest in a new balanced fund with less attention (AUM). Sometimes you got to roll the dice. As as you know how to review performance, it should be fine. Mirae Asset Hybrid Equity Fund has just completed three years in June 2018. Let us find out how it has fared in this short period.
Mirae Asset Hybrid Equity Fund: Performance analysis
The fund uses the standard aggressive hybrid benchmark: CRISIL Hybrid 35+65 Aggressive. However, I prefer to use the Nifty 100 Equal Weight Index. The reason is that I expect an aggressive hybrid index to offer a return close to an equity index with lower risk. This is the only way the expense ratio can be justified IMO. By the way, the Direct plan for this fund has an expense ratio of only 0.97% which is pretty awesome for a ~ 1300 Crore AUM. Update: the total expense ratio has been further reduced to 0.36%
Since Nifty 100 Equal Weight Index has a similar performance to the Nifty Blend Index (a homemade mix of 50% Nifty 50+ 50% Nifty Next 50), we are also comparing the performance of this fund with the blend. We start with the rolling return and risk over one year.
The fund outperformed N100EW 306 out of 555 times and that is more than decent for a hybrid fund. Again a lesson to those who foolishly assume 100% equity exposure is better than 75% exposure. The risk as seen in the bottom graph is also reasonably low. Over two years, the fund beat the index, 267/307 times and over three years, 39 out of 64 times. Again all decent IMO.
Note: If you use the Mutual Fund Analyzer: Fund A vs. Fund B and compare Mirae Hybrid vs Mira India Equity fund, you will notice that the Hybrid fund underperforms a little bit but with lower risk. So again, this is a fair deal.
Who should invest in Mirae Asset Hybrid Equity Fund?
So now that we see that performance with an equity index is reasonable with lowe risk, you certainly can consider investing in this fund although it does not have enough performance history under its belt. However, invest only if
- you need money after 10 years
- you do not hold the other two flagship Mirae funds
- you do not hold any other aggressive hybrid or large-cap fund
- you want to use aggressive hybrid (balanced) Mutual Funds as the core equity portfolio holding
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