Three excellent aggressive hybrid mutual fund performers

These three aggressive hybrid funds have outperformed CRISIL Hybrid 35+65 - Aggressive Index and also done well wrt Nifty 100 TRI

Published: April 15, 2020 at 10:27 am

Here are three aggressive hybrid mutual funds that have consistently beaten CRISIL Hybrid 35+65 – Aggressive Index in terms of both risk and reward.

The CRISIL Hybrid 35+65 – Aggressive Index is the representative category benchmark for aggressive hybrid funds which are mandated to hold a minimum 65% equity (typically little or no arbitrage) and the rest in bonds.

The index comprises of S&P BSE 200 TR(65%) and CRISIL Composite Bond Fund
Index (35%). the composite bond index has an average maturity of 7.19 years and the following composition as per the April factsheet:

  • CRISIL Composite Gilt Index 45%
  • CRISIL AAA Long Term Bond Index 18%
  • CRISIL AAA Medium Term Bond Index 12%
  • CRISIL AAA Short Term Bond Index 21%
  • CRISIL AA and AA+ Long Term Bond Index 1%
  • CRISIL AA and AA+ Medium Term Bond Index 1%
  • CRISIL AA and AA+ Short Term Bond Index 2%

The analysis was carried out for 33 aggressive hybrid funds, out of which 20 of them were more than five years old. Two benchmarks used for this category alone: NIfty 100 TRI and CRISIL Hybrid 35+65 – Aggressive Index. The full details of the study along with data for other mutual fund categories can be found here: April 2020 Equity Mutual Fund Performance Screener


How the funds were selected

We consider every possible 1,2,3,4 and 5-year investment windows bet 1st Jan 2013 and April 9th 2020.

We shall define a, return outperformance consistency = no of times fund beat index/tot no returns. For example, say we have 100 13-year return data points and a fund got a return higher than the index in 65 of those instances. Then return outperformance consistency = 65/100 = 65%.

We then define a downside protection consistency using the downside capture ratio. This measures how much of a benchmark’s monthly losses (if monthly return < 0) a fund captures. A downside of 80% means a fund has captured only 80% of the index losses. Read more: Do active mutual funds offer downside protection? Or is it a myth?

Downside protection consistency is defined as the number of investment periods for which the fund fell less than the index (suffered lower losses) divided by the total no of periods. This is computed for every possible 1,2,3,4 and 5-year windows.

To qualify as “excellent” or as a “consistent performer” the fund should have a return outperformance consistency of 70% and a downside protection consistency of 70% or more over 1,2,3,4 and 5 -year periods.

Three Consistent Aggressive Hybrid Mutual Funds

  1. HDFC Children’s Gift Fund Investment Plan-Direct Plan
  2. ICICI Prudential Equity & Debt Fund – Direct Plan
  3. HDFC Hybrid Equity -Direct Plan

This does not mean other funds are not good enough or these funds will continue to do well in future! The return outperformance consistency and downside protection consistency data for the three funds are tabulated below.

HDFC Children’s Gift Fund Investment Plan-Direct Plan

Duration (years)Return outperformance ConsistencyDownside protection consistency
172.2%72.4%
282.4%70.3%
396.7%73.1%
498.5%92.5%
597.7%100.0%

ICICI Prudential Equity & Debt Fund – Direct Plan

Duration (years)Return outperformance ConsistencyDownside protection consistency
171.9%90.8%
274.6%100.0%
386.1%98.1%
497.9%100.0%
596.8%100.0%

This is the detailed review of the fund

HDFC Hybrid Equity -Direct Plan

Duration (years)Return outperformance ConsistencyDownside protection consistency
173.5%88.2%
273.8%98.4%
385.1%100.0%
492.6%100.0%
595.8%100.0%

This is the detailed review of the fund

The three aggressive hybrid funds listed above have also managed to do well wrt Nifty 100 TRI. Details available here: April 2020 Equity Mutual Fund Performance Screener. Existing investors in these funds can continue to hold them. New investors can consider these as their core portfolio holding as explained before: Why Aggressive Hybrid (balanced) Mutual Funds score over diversified funds and Using Balanced Mutual Funds As The Core Equity Portfolio Holding

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