Lately, the equity markets have witnessed a vertical movement that has stretched the valuations of the equity markets. In such circumstances, several investors choose to either rebalance their investment portfolio or end-up booking their profits. However, there are some investors who decide to not disturb their existing asset allocations of their investments and instead choose to invest in hybrid funds.
If you are wondering what hybrid funds are, then these are simply a type of mutual funds that invest in more than one type of asset classes. Hybrid mutual funds, also known as balanced funds, often invest in a mix of debt funds and equity funds, and sometimes other commodities as well such as gold. Since June 2021 to August 2021, the asset under management (AUM) of hybrid funds have increased by around 13%. What’s interesting to note over here is that it is not only the AUM that has witnessed the surge – the net inflows of the hybrid funds have increased in this span as well. In August 2021, the net inflows in the hybrid fund category stood at Rs 18705 crores! This is significantly higher than the equity and debt category which stood at Rs 8666 crores and Rs 1074 crores respectively. Do you know the reason behind it? No, don’t worry; In this article we will understand the reason behind the increase in the inflows related to balanced mutual funds.
According to a recent report by the Indian mutual funds’ regulator – AMFI (Association of Mutual Funds in India), different categories of hybrid mutual funds have witnessed a surcharged in the net inflows. Right from balanced hybrid funds or aggressive hybrid funds to multi asset allocation funds to conservative hybrid funds to dynamic asset allocation funds or balanced advantage funds to equity savings funds to arbitrage funds, all these balanced mutual funds have witnessed a surge in these three months – June 2021 to August 2021. Let’s understand this better.
| Asset under management of hybrid mutual funds | ||||
| June 2021 | July 2021 | August 2021 | Increase | |
| Aggressive hybrid fund/ Balanced hybrid funds | Rs 1,31,475 crores | Rs 1,35,589 crores | Rs 1,40,797 crores | 7.1% |
| Multi asset allocation fund | Rs 16,073 crores | Rs 16,432 crores | Rs 17,059 crores | 6.1% |
| Conservative hybrid funds | Rs 14,564 crores | Rs 17,080 crores | Rs 17,378 crores | 19.3% |
| Arbitrage funds | Rs 94,841 crores | Rs 1,08,178 crores | Rs 1,08,251 crores | 14.1% |
| Balanced advantage fund/ Dynamic asset allocation fund | Rs 1,19,262 crores | Rs 1,22,592 crores | Rs 1,41,493 crores | 18.6% |
| Equity savings fund | Rs 11,380 crores | Rs 12,031 crores | Rs 13,136 crores | 15.4% |
| Total | Rs 3,87,594 crores | Rs 4,11,902 crores | Rs 4,38,114 crores | 13% |
From the above table, you can see that the highest increase in asset under management in absolute terms was witnessed by Balanced advantage fund/ Dynamic asset allocation fund. This is because these types of mutual funds are most suited category of mutual funds in an ambiguous market condition. This is because unlike static allocation funds, the dynamic funding mechanism of these mutual funds’ category aids these funds to be in a better position to feat the opportunity.
