Hybrid funds have lived up to investors’ expectations by delivering better returns in times of recent volatility in the equity markets, despite the gradual recovery and the record high gold prices.

Hybrid mutual funds tend to outperform the broader indices since their portfolios are hedged with a mix of assets and the allocation is aptly divided between equity, debt and other assets such as gold and silver.

Hybrid funds from Nippon India MF have topped the table with the Nippon India Multi Asset Allocation Fund, which has an exposure to gold and silver, delivering a 53 per cent absolute return in last two years while its Balanced Advantage Fund clocked 34 per cent return.

Similarly, Kotak Debt Hybrid delivered absolute return of 26 per cent, while ICICI Balanced Advantage and SBI Conservative Hybrid gave 34 per cent and 24 per cent in last two years.

Market conditions

Attributing the growth in hybrid funds to uncertain market conditions, DD Sharma, MD, MF King said the market volatility instigated by the fresh signs of escalation in Russia-Ukraine conflict and ambiguity over tariffs by the US administration may create a psychological fear among investors, pushing them to exit the markets.

In conditions like these, hybrid funds make more sense as they invest in a combination of assets including equity, debt, gold and other asset classes like real estate, he said.

Since hybrid funds combine two or more asset classes in one portfolio, they tend to capture growth opportunities while cushioning the impact of market corrections, he added.

Dynamic approach

Hybrid funds adjust their equity, debt and other asset class exposure based on valuation and other market indicators. Experts feel that this dynamic approach helps reduce the downside risk which is the reason investors prefer hybrid funds.

However, the inflows into hybrid funds have been volatile in recent months due to influence of Arbitrage funds. In last two months, hybrid funds registered a combined inflow of ₹35,013 crore against an outflow of ₹947 crore in March, according to AMFI data.

However, multi asset allocation and dynamic asset allocation funds have consistently received a combined inflow of ₹6,703 crore and ₹2,793 crore in last three months.

Published on June 11, 2025