Hybrid Mutual Funds -Types of Hybrid Mutual Funds and Asset Allocation

There are various categories of mutual funds. Hybrid mutual funds are also a category of mutual funds. This post discusses the hybrid mutual funds with their types. We will also give a brief description of asset allocation scheme of each of these mutual funds.

hybrid mutual funds

What is a Hybrid Mutual Fund?

A mutual fund that invest in both equities and debts is termed as hybrid mutual funds. They provide a diversified portfolio of investment to the investors comprising a variety of instruments typically including equities, and bonds. The diversification in these funds is provided in order to achieve a balanced return on investments and manage the risk.

Hybrid Mutual Funds are the mixture of Equity Mutual Funds and Debt Mutual Funds. In Equity Mutual Funds, the major asset class is the equity and in Debt Mutual Funds, the major asset class is debt while constructing the portfolio.
Types of Hybrid Mutual Funds

There are following types of hybrid mutual funds:-

Aggressive or Balanced Mutual Funds

An Aggressive Mutual Fund is a type of mutual fund that which includes both equity and debt instruments in the portfolio but it focuses on risk instruments, i.e. equities. They invest 65-80% of total asset in equities.

Conservative Hybrid Funds

These funds invest 75-90% of the total asset in bond instruments and rest in equity stocks,

Arbitrage Funds

Arbitrage funds are those types of mutual funds which take benefits of the price difference between different exchanges. These funds make a profit by buying and selling the securities on a price difference between cash and derivatives market. It buys stock in the cash segment of the stock market on a lower price and sells this stock in the future segment on a higher price and vice-versa.

Capital Protection Funds

These mutual funds invest majority of its asset in debt instruments particularly zero-coupon debts, and a small fraction of asset in equities. These funds are generally close-ended funds and have a fixed maturity date.

Equity Savings Funds

These mutual funds invest in debt instruments, equities and equity arbitrage. They maintain 65% focus on equities.

Dynamic Asset Allocation or Balanced Advantage Funds

These funds keep changing the focus between equity and debts depending on the market conditions. The allocation of asst varies between asset classes.

Multi Asset Allocation Funds

These hybrid mutual funds invest in at least three asset classes. At lease 10% of the total asset is allocated in each class. The variety of asset classes may be equity, debt, cash, or mutual funds.

Fixed Maturity Plans

These are close-ended funds that invest in both debt and equity.They have a fixed maturity period.

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Disclaimer: This post is meant for educational purpose only. Please contact your financial/investment advisor for necessary suggestions.

Tags:: #Mutual Funds #Hybrid Funds #Investment

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