Mutual funds (MF) companies and investment experts are constantly recommending the hybrid fund category amid increasing instability in the equity market. Despite this, there is a decrease in interest of investors in this category. The net investment and folio growth of hybrid funds have been declining for three consecutive months. These hybrid funds include Balanced Advantage Fund (BAF), multi-asset funds and other funds.
During January 2025, only 1,36,000 accounts were added to this category. This is the lowest monthly basis since December 2023. Pure investment during the month was Rs 4,476 crore, which is the weakest in 13 months. This figure of net investment does not include arbitrage funds because there is a big difference in the nature of their investment compared to their investors Aadhaar and other hybrid funds.
According to the fund officials, the decline indicates that probably investors are holding cash with them to avail the possible decline in the equity market. Hybrid funds, especially BAF and multi-asset funds have been a favorite recommendation of fund managers and analysts. These schemes are considered safe than pure equity funds during a period of more market evaluation and uncertainty.
Senior research analyst at FundsIndia Jeral Mehta said, “BAF actively allocates between equity and date based on market conditions and they use indicators like earning yields ie earnings than evaluation, speed and g-sex . Equity investment is reduced when equity assessment is high and when the evaluation is low, equity investment is increased. Because of this, they become a suitable option to deal with potential instability. ‘
Multi-asset funds and aggressive hybrid funds are among the most prominent hybrid offers beyond BAF. Multi-asset funds allocate a portion of their funds in equity and date as well as gold and silver, while aggressive hybrid funds maintain date investment as well as minimum 65 percent equity investment.
Hybrid funds are generally seen as an evergreen option for investors or outright investors avoiding risk.
Motilal Oswal Private Wealth recently said in the note, ‘We hope that the market will be in a stages of consolidation due to decline for the next three-four months. Such stages should be used for gradually accumulation. Investors for equity investment can consider lump sum investment in hybrid and largecap equity-focused funds.
First Published – February 26, 2025 | 11:14 pm IST
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