THE HYBRID PATH TO RICHES

THE HYBRID FUND SPACE IS EVOLVING FAST, AND INVESTORS NEED TO STAY ON TOP TO ENSURE THEY ARE PICKING STABILITY OVER RISK

- BY SHOAIB ZAMAN

IF EQUITIES ARE the drama queens of investing, with swings and high rewards, and debt funds are the calm monks, then hybrid funds are the diplomats: forever trying to keep the peace between the two. They promise investors the best of both worlds, the upside of equities and the cushion of bonds. Their purpose isn't to win the race but to ensure the investor sleeps well at night.

No wonder hybrid funds are a favourite of those who want steady wealth creation without heartburn.

Yet, the landscape has become complex even since the capital markets regulator, Securities and Exchange Board of India (Sebi), in 2017 identified seven official hybrid fund categories. Now there is an entire galaxy of hybrid-like schemes that blend assets in creative, and sometimes confusing, ways.

There are conservative hybrid funds that hold just 10-25% in equities, while aggressive ones go up to 65-80%. The more flexible balanced advantage or dynamic asset allocation funds (DAAFs) can swing from 0% to 100% equity depending on market conditions. Arbitrage funds sit at the low-risk end, while multi-asset funds add gold, silver, or even international exposure to the mix. There are many more such combinations.

INNOVATION CREATES GREY ZONES