Why there is increase in inflows in hybrid funds?

Shashikant Singh
Why there is increase in inflows in hybrid funds?

In the last eighteen months, equity market has seen a vertical movement, which has made the valuation of the equity market stretched. In these circumstances, most of the investors either book profit or do a rebalancing of their portfolio. Nevertheless, some investors do not disturb their existing investment or portfolio and invest the additional amount towards hybrid funds. These are the funds that invest in a mix of equity, debt and other commodities also such as gold.  In the last three months ending August 2021, asset under management (AUM) of funds dedicated to the Hybrid category has increased by 13 per cent. It is not only the AUM has increased even the inflows have been better. For the month of August 2021, net inflows into Hybrid category of fund was to the tune of Rs 18705 crore. This is better than the debt and equity category that received just Rs 1074 cror and Rs 8666 crore respectively.

AUM of Hybrid Funds 

       

Category 

Jun-21 

Jul-21 

Aug-21 

Increase 

Conservative Hybrid Fund 

                14,563.55  

17,079.50 

17,378.04 

19.3% 

Balanced Hybrid Fund/Aggressive Hybrid Fund 

            1,31,474.85  

1,35,589.18 

1,40,797.39 

7.1% 

Dynamic Asset Allocation/Balanced Advantage Fund 

            1,19,262.08  

1,22,591.86 

1,41,492.63 

18.6% 

Multi Asset Allocation Fund 

                16,072.70  

16,432.03 

17,059.05 

6.1% 

Arbitrage Fund 

                94,840.95  

1,08,177.88 

1,08,251.29 

14.1% 

Equity Savings Fund 

                11,379.89  

12,031.15 

13,135.98 

15.4% 

  

            3,87,594.01  

           4,11,901.60  

          4,38,114.38  

13.0% 

Source: AMFI 

  

  

  

  

 

The highest increase in AUM in absolute terms was observed in the Dynamic Asset Allocation/Balanced Advantage Fund. They saw an increase of almost 19 per cent in their AUM in the last three months. This is considered to be the best and most suited category in an uncertain market. As opposed to static allocation funds, the dynamic funding mechanism of the category helps the fund to be in a better position to exploit the opportunity.

Conservative Hybrid Fund also saw more than 19.3 per cent growth in their AUM albeit at a lower base. These funds are suited for a conservative investor as they have major exposure to debt and lower exposure to equity.

Looking at the current market situation and higher valuation, investors with different risk appetites are opting for a different types of hybrid funds. This is the reason why we are seeing a rise in the AUM of hybrid funds.

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