HYBRID Funds & You

Hybrid fund is a category that is characterized by funds that invest among two or more asset classes. These funds generally invest in a mix of stock, bonds and commodities. Read on to know if these are suitable for investment

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Mutual funds offer a wide variety of schemes in order to meet the needs and goals of investors. Investors willing to invest in equity can invest in equity-oriented schemes, investors with lower risk appetite go for debt funds and those investors who want to track the index can invest in index funds, etc. Now the question that arises is what if any investor wants to invest in a single fund and wants to take exposure to both equity and debt? The answer to this question is hybrid funds. Hybrid fund is a category that is characterized by funds that invest among two or more asset classes. These funds generally invest in a mix of stock, bonds and commodities. Recently, there has been upsurge in net inflows and the AUM of hybrid schemes in this year. The following table shows the increase in net inflow and AUM as compared to equity-oriented and total AUM of all the schemes since the last six months.

As can be seen from the above table and chart, there has been a steady increase in net inflow into hybrid funds as well as AUM of hybrid funds as a percentage of the total AUM of domestic mutual funds. Except for the month of May 2021, there is a decrease in net inflow from the month of April but it has again bounced back in the month of June by 98.82 per cent. One of the reasons for such a rise in inflows is the sharp rise in the equity market. This has led to stretched valuations and hence investors are not very confident of investing in equity funds directly and are hence investing in hybrid funds based on their risk appetite.