Top 5 Best Aggressive Hybrid Equity Funds (Balanced Equity Mutual Funds)

Mutual funds are primarily classified as either Equity or Debt, based on where the funds are invested.

Equity funds primarily invest in stocks/shares and Debt funds primarily invest in Bonds, Government securities and Fixed interest bearing instruments.

Whereas, Hybrid Funds invest in both equity and debt instruments.

The Mutual Funds were further re-categorized by SEBI in 2018. They are now broadly classified in the following groups;

  • Equity Schemes
  • Debt Schemes
  • Hybrid Schemes
  • Solution Oriented Schemes (for example : Retirement oriented / Pension oriented schemes)
  • Other Schemes

Hybrid Mutual Fund Schemes – Classification

Hybrid Mutual Fund Schemes have been further classified as below;

latest classification of hybrid mutual fund schemes balanced dynamic arbitrage equity savings funds
Different Types of Hybrid Mutual Fund Categories | SEBI’s Re-categorization of Mutual Funds

An Aggressive Hybrid Fund (erstwhile known as Equity Balanced Fund) is a type of Equity Mutual Fund which combines the feature of both equity and debt in a single instrument. It means that the money pooled from the unit-holders are invested both in debt and equity related instruments.

However, the equity element in the underlying portfolio of a Hybrid Equity Fund should consist of at least 65% of the entire assets under management. The rest portion of the portfolio can consist of debt instruments and cash in hand. In general, the exposure in equity can range from 65% to 85% and is dependent on the market condition and the fund manager’s investing philosophy.

What are the main advantages of investing in Aggressive Hybrid Funds?

The main benefits of investing in an aggressive Equity Hybrid fund are;

  • Diversification : The funds are invested in both equity and debt financial securities leading to diversification of investments.
  • Asset Allocation & Re-balance : Hybrid Equity funds may regularly re-balance the portfolio based on market conditions & asset allocation limits. An investor is, thus, saved the hassle of manually re-balancing the portfolio. (But it is prudent not to remain invested in these funds till your reach your Financial Goal target year. You may have to switch to safer investment avenues as you reach your target year.)
  • Low volatility : Aggressive Hybrid funds can be slightly less risky when compared to pure Equity funds. Equity portion will provide the capital appreciation through stock prices appreciation and dividend income. Whereas, Debt portion can provide stability through interest income and appreciation in Bond prices.
  • Any type of an investor can consider adding an aggressive hybrid fund to his/her portfolio for medium to long-term goals like Retirement Planning or for Kid’s Higher Education goal planning.
  • The Long-term Capital gains of up to Rs 1 lakh in a Financial year is tax-exempt.

Top 5 Best Aggressive Hybrid Equity Funds

I have considered below top and consistent performers for this year’s review of Best Aggressive Hybrid Mutual Funds 2019 (arranged in an alphabetical order) ;

  • Aditya Birla Sunlife Equity Hybrid ’95 Fund (Erstwhile Aditya Birla Sun Life Balanced ’95 Fund)
  • Franklin India Equity Hybrid Fund (Erstwhile known as Franklin India Balanced)
  • HDFC Hybrid Equity Fund (Erstwhile HDFC Premier Multi-Cap & HDFC Balanced)
  • ICICI Prudential Equity & Debt Fund (Erstwhile ICICI Prudential Balanced)
  • L&T Hybrid Equity Fund (Erstwhile L&T Prudence Fund)
  • Principal Hybrid Equity Fund (Erstwhile Principal Balanced)
  • SBI Equity Hybrid Fund (Erstwhile SBI Magnum Balanced) &
  • TATA Hybrid Equity Fund (Erstwhile TATA Balance Fund)

Let’s have a look at the Risk ratios of these top performing & best Hybrid Equity Mutual Fund Schemes; 

Top performing consistent Best Aggressive Hybrid Equity Funds 2019 Risk ratios details
Risk ratio details of Aggressive Hybrid Equity Funds 2019 | Consistent Performers

You can use the below image as a reference to review the risk ratios while selecting right equity mutual fund schemes (to know, how consistent the funds have been..?).

How to select the right best mutual fund scheme comparison of mutual funds with risk ratios standard deviation alpha beta pic
Shortlist right Mutual Fund Scheme(s) based on Risk ratio parameters

Besides the above Volatility related parameters, I have analyzed the funds based on their past performances i.e., based on the returns generated over the last many years and shortlisted the Top 5 Best Aggressive Hybrid Equity Funds.

Top 5 Best Aggressive Hybrid Funds Top ranked Balanced Equity Mutual Fund Schemes to invest in India 2019 2020
Top 5 Best Aggressive Hybrid Equity Funds to invest in India
  • ICICI Pru Equity & Debt Fund :
    • This fund has been a consistent performer with low volatility and has a good downside protection.
    • If you are a conservative ‘equity’ investor then you can consider adding this fund to your MF portfolio.
    • This fund has given around 15% returns in the last 10 years.
    • The Fund’s portfolio current has 73.1% investment in Indian stocks of which 62.34% is in large cap stocks, 5.18% is in mid cap stocks, 5.04% in small cap stocks. It has 21% investment in Debt of which 0.34% in Government securities, 20.92% in funds invested in very low risk securities.
  • HDFC Hybrid Equity Fund :
    • This fund has given the best returns of around 16% in the last 10 years when compared to its peers in the above list.
    • It’s portfolio has 69.94% investment in Indian stocks of which 49.44% is in large cap stocks, 9.81% is in mid cap stocks, 10.68% in small cap stocks. The Fund has 26.8% investment in Debt of which 7.82% in Government securities, 18.21% in funds invested in very low risk securities.
    • You can notice that the fund has been little aggressive with its allocation as it has invested 20% of its equity portfolio in Mid/Small cap stocks.
  • Franklin Equity Hybrid Fund :
    • You can expect ‘average’ and consistence performance with very low risk profile from this fund.
    • However, the returns generated by this fund in the last 3 years have not been very great.
    • The Fund has 69.39% investment in Indian stocks of which 58.59% is in large cap stocks, 8.14% is in mid cap stocks, 2.67% in small cap stocks.Fund has 27.15% investment in Debt of which 1.2% in Government securities, 25.96% in funds invested in very low risk securities..
    • As per Valueresearchonline portal, its Debt portfolio has an average ‘AA’ grade (AAA rating is considered as the safest profile).
  • SBI Equity Hybrid Fund :
    • This Fund has 72.84% investment in Indian stocks of which 54.1% is in large cap stocks, 10.71% is in mid cap stocks, 7.54% in small cap stocks.Fund has 24.41% investment in Debt of which 6.32% in Government securities, 16.72% in funds invested in very low risk securities..
    • The returns generated by this fund since its launch (1995) are around 16%.
    • Though this fund generates decent returns in bull market, it does not have great downside protection when market’s performance turns negative.
  • Principal Hybrid Equity Fund :
    • You can consider this fund as a ‘high risk – high return’ kind of equity hybrid fund. It has a high standard deviation.
    • It’s performance in the recent past has been very good. The fund’s ‘down-side’ protection measure has improved a bit in the last 3 years or so.
    • The Fund has 71.78% investment in Indian stocks of which 53.32% is in large cap stocks, 7.37% is in mid cap stocks, 11.09% in small cap stocks.Fund has 20.12% investment in Debt of which 3.75% in Government securities, 13.86% in funds invested in very low risk securities.

(Though the performances of hybrid funds like HDFC Children Gift Fund, TATA Retirement Savings Fund, HDFC Retirement Savings Fund etc., have been good, I have ignored them due to certain draw-backs associated with these kind of Schemes.)

Some important points to ponder over before investing in an aggressive hybrid mutual fund scheme.

  • Kindly do not consider aggressive Hybrid Equity funds as low risk-profile Funds. Treat them as part of your Equity-side allocation of your Investment portfolio.
  • If you are investing only in Equity index funds, you may add an hybrid equity fund to your MF portfolio for a better down-side protection.
  • While shortlisting an equity hybrid fund, do check out the average quality of the fixed income securities (Fund’s debt portfolio) owned by the Fund. You can find these details in portals like Valueresearchonline, morningstar or respective AMC website.
  • It is prudent not to invest in Dividend oriented aggressive hybrid equity funds.
  • You consider following a combination of SIP and lump sum investment strategy.
  • If you are comfortable picking a mutual fund scheme on your own, consider investing in a Direct plan. Else, consult a financial advisor.
  • Though Equity oriented Balanced funds have low risk profile compared to pure Equity funds, but it does not mean that they are totally risk-free. You may have to remain invested for longer period to get decent returns.

I am a strong advocate of Aggressive Hybrid Equity Funds for achieving long-term financial goals. Personally, I have good amount of exposure to HDFC Hybrid Equity Fund.


Related Article : ‘My latest Mutual Fund Portfolio

Kindly note that Mutual Funds are subject to market risks and their past performance may or may not be repeated.

(Featured Image courtesy of Stuart Miles at FreeDigitalPhotos.net) (Post first published on 28- June -2019).
(Data Source / References : Valueresearchonline, Moneycontrol, Morningstar, Freefincal & The Economictimes)

  • Vikas Vyas says:

    Dear Sree. Thank you for your valuable articles. Have gained immense knowledge from them. My retirement is 10 years away or at the most 12. I started investing in MF from 2010 and also in PPF . Now with more reading i understand one has to have proper asset allocation. My Equity to Debt is at present : 75: 25 and I want to balance to 60:40. PPF alone will not be enough so i am now looking to invest in Debt funds. This can also be handy in balancing periodically.

    My query is which debt funds you suggest for long term. I would rather play safe and try to preserve capital than chase returns as I am already taking risks in equity portion of my portfolio.

    After much reading and knowing some basics I am planning to invest in HDFC Short Term Debt Fund and ICICI Pru Arbritrage Fund. If you can please let me know your views on this.

    Thanks

    ViKas

    • Sreekanth Reddy says:

      Dear Vikas,
      If you are a salaried person, can also make VPF as part of your debt portfolio besides EPF.

      Instead of debt funds, Arbitrage funds can make sense for now.

  • Susan says:

    Dont u think, Mirae Asset Hybrid Equity Fund – Direct Plan is the best hybrid fund. Look at the expense ratio 0.29% + returns. Also, the fund manager is same of one of the best funds Mirae emerging equity?

    • Sreekanth Reddy says:

      Dear Susan,
      Agree with you that this fund has performed well in the recent past, but its just a 4 year old one, hence did not consider for the review.

  • sunil kulkarni says:

    Dear Sreekanth

    what is drawback of Tata Retirement saving plan moderate?
    i want to start STP from Tata Treasury to tata retirement saving fund as I have 75000rs.
    OR suggest where to invest . i have 5 years horizon

  • pramod says:

    Dear Sreekanth
    I use aggressive funds as core of my portfolio and use them in place of large cap funds and all my mutual funds investments is for long term wealth generation 10 + years . I am a moderately aggressive investor. below is my current portfolio .

    1) HDFC hybrid equity – Doing 19 K SIP . My father invests here
    2) ICICI Pru Equity & Debt Fund – Doing 18 K SIP
    3) Franklin Equity Hybrid Fund – Invested 2 lac in August 2016 .No SIP’s.
    4) Aditya Birla Sunlife Equity Hybrid ’95 Fund – Doing 15k SIP . My father invests here.
    5) Kotak standard multicap – 30 K SIP
    6) Motilal Oswal most focused 35 – 10 K SIP
    7) Mirae Asset emerging bluechip – 25 K SIP
    6) HDFC mid cap opportunities – 20 K SIP

    would greatly appreciate your opinion on 1) which aggressive balanced funds i can reduce 2) if i want to increase my SIP by another 30 K per month which fund you suggest i channelize this money ?

    • Mukesh Kannan says:

      Your portfolio is tooo cluttered. Bring down the funds to 2-3. Otherwise, you will have tough time in managing all these funds.

    • Sreekanth Reddy says:

      Dear pramod,
      Any specific reason/strategy for picking 4 Hybrid Equity Funds?

      • Pramod says:

        No strategy as such, was new to mutual funds in 2016 , had a lumpsum of 12 lac in 2016, which i distributed across these 4 balanced funds, also my dad invests in 2 out of 4 via sips and i invest in other 2. Now that i am understanding mutual funds, wanted to take your opinion on how i can slim my portfolio

        • Sreekanth Reddy says:

          Dear Pramod,
          May I know if your father’s and your investment objectives are similar?

          To be frank, all the above listed 6 schemes are decent ones. But, investing in too many funds may pose inconvenience to you, in terms of managing, tracking etc.,

          You may retain the existing units as they are and can start making additional investments/SIPs in the below funds;

          HDFC hybrid equity – Doing 19 K SIP . My father invests here
          ICICI Pru Equity & Debt Fund – Doing 18 K SIP
          Kotak standard multicap – 30 K SIP
          Motilal Oswal most focused 35 – 10 K SIP
          HDFC mid cap opportunities – 20 K SIP

          You may reduce the allocation to this fund : Mirae Asset emerging bluechip – 25 K SIP, as you already have one dedicated Mid-cap fund.

          Related article : Mutual Fund Portfolio Overlap Comparison Tools

          • Pramod says:

            My father is retired and he invests in balanced to give slight nudge to his retirement savings as most of his money is in debt instruments. i mostly use them as large cap replacement of my portfolio + the debt component offers some cushion against overall risk. I have one more question, is motilal oswal multicap a good one to keep continuing keeping in view the performance last 1- 2 yrs and fund manager changes?

          • Sreekanth Reddy says:

            Dear Pramod,
            It is not a pure multi-cap fund, it is a Focused fund with multi-cap approach. The number of stocks that they can pick is limited to 35.
            This fund is relatively a new entrant (launched in 2014), its 5 year performance is good, but last 1 year it has not beaten its benchmark returns. There has been a change in FM (April 2019).

            But, it may be too early to talk negative about this fund. You may give some more time to make a decision.

  • Mathi says:

    Dear Sreekanth,

    Principal Hybrid fund NAV was fell down almost 2% during recent DHFL issue and fund looks like having DHFL papers still and so investing in this fund currently risky. What is your opinion?

    • Sreekanth Reddy says:

      Dear Mathi,
      The fund has currently invested around 20% of corpus in debt securities. Of it only around 2% is in DHFL NCDs. Yes, these bonds have been downgraded but the impact can be limited to hybrid equity funds when compared to pure Debt oriented funds.

      The average asset quality of debt securities owned by this fund is AAA.

      If you are uncomfortable investing in this fund, you can consider looking at other peers.

      • Mathi says:

        Thanks for your reply. I have already invested in this fund and avoiding further investments since known risk. However for new investors benefit, I have mentioned here.

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