Conservative hybrid funds have shown their mettle by achieving a delicate balance between security and profitability, which makes them an attractive option for investors seeking moderate risk exposure with potential for healthy returns.
Based on data provided by the Association of Mutual Funds of India (Amfi), as of September 6, 2023, this category of mutual funds has given an average return of 8.76 per cent in one year and 10.09 per cent in three years, with many standout performers giving over 12 per cent returns.
This investment category derives its name from its ‘conservative’ asset allocation strategy. A majority of its assets—ranging from 75-90 per cent—are allocated to debt instruments, while the remaining 10-25 per cent find a place in the equity market. Debt securities include bonds, debentures, and treasury bills which have a lower risk profile.
Most top-performing funds in the category strive to keep the equity component as close as possible to 25 per cent. SBI Conservative Hybrid Fund, which is a frontrunner across both one- and three-year periods, has allocated 23.11 per cent of its portfolio to equity, 70.9 per cent to debt, and 5.3 per cent in cash and cash equivalents. A similar strategy has been followed by many other top performers, too.
This balanced approach of portfolio allocation positions conservative hybrid funds as slightly riskier than pure debt funds, yet less volatile as compared to equity mutual funds.
These funds are particularly suitable for investors targeting short-term or medium-term goals. Especially for investment periods spanning less than three years, the inclusion of a considerable portion in safer instruments offers an optimal strategy over an exclusive reliance on equities.
The category gave an average return of 8.76 per cent in one year. HDFC Hybrid Debt Fund leads the race in the span of one year, delivering an impressive 11.63 per cent return.
Right on its tail are Kotak Debt Hybrid Fund and SBI Conservative Hybrid Fund, with solid returns of 10.79 per cent and 11.27 per cent, respectively. Notably, 10 out of the 20 funds surpassed the category average of 8.76 per cent return.
The category gave an average of 10.09 per cent in three years. Bank of India Conservative Hybrid Fund leads the segment with an impressive return of 14.23 per cent. SBI Conservative Hybrid Fund, HDFC Hybrid Debt Fund and Kotak Debt Hybrid Fund follow suit, with returns of 12.68 per cent, 12.51 and 12.48 per cent, respectively.