Mutual fund investors have turned more conservative in the last one year, and wisely so. Data shows that the biggest growth in assets over the last 12 months has been in the balanced funds category, which invests in both debt and equity.

Data from the Association of Mutual Funds in India show that average assets under management for balanced funds grew 48 per cent over the last 12 months, compared to 14 per cent growth in pure equity funds and 17 per cent growth in debt schemes. Year-on-year growth in assets was highest, however, in ETFs at 128 per cent as domestic pension funds started investing in the ETF.

Balanced funds, or hybrid funds, invest in both debt and equity, though the proportions differ based on fund’s primary focus. The benchmark S&P BSE Sensex has lost 3 per cent over the last 12 months, so investing in balanced funds which also dabble in debt has reduced the downside for investors. Over the same period, the I-Pru’s Balanced Advantage Fund gave a return of 8.48 per cent while the Focused Bluechip from the same fund house gave a lower return of 7.44 per cent. Anjaneya Gautam, National Head – MFs, Bajaj Capital, believes that lumpsum flows are now coming into hybrid funds. “With such funds, even if the market corrects a bit, the debt component gives you a cushion against it. Plus, balanced funds have a continuity of dividend and offer tax arbitrage as dividend is not taxed in the hands of the investor.” In June last year, the average monthly AUM in balanced funds was ₹28,296 crore. In June 2016, this number increased to ₹41,846 crore. Over the same period, the increase in AUM in growth funds was the highest in absolute numbers but lower on a percentage basis (AUM of ₹3.62 lakh crore) and debt (₹5.9 lakh crore), as investors not only seek returns but also wish to see their capital protected.

‘Sign of maturity’ “Investors moving into allocation funds, instead of adopting a plain equity or debt approach is a sign of maturity among investors and intermediaries,” Gautam added. Another hybrid category that is gaining popularity is the monthly income plan, the senior fund advisor said. Under MIP, investors invest a lumpsum with a fund house and receive a certain income every month.

“If you had invested ₹10 lakh in Reliance MIP 10 years back, and withdrawn at 8 per cent, so over 10 years, he would have withdrawn ₹9.6 lakh. At the end of the 10 years, the market value is still ₹10 lakh. These are historical numbers but we see investors using such solutions, to say, earn a fixed amount for household expenses every month.”

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