Investors pick hybrid MFs

Retail investors are warming up to the idea of hybrid mutual fund schemes with a limited exposure to equity, say investment consultants.
Faced with uncertainties in the equity market and lack of clear direction in the interest rate movement, investors are playing it safe and at the same time hoping to benefit from a possible upside in the stock market.

Debt-oriented hybrid schemes have performed very well in the last one year, with the category returning around 20% in the past year. Debt-oriented hybrid schemes typically invest around 15-20% of its total portfolio in stocks.

"Investor appetite for debt-oriented hybrid schemes have gone up in the recent past. It may be because they can't invest in pure debt schemes like income or gilt schemes because of the uncertainty in the interest rate scenario," says Hemant Rustagi, CEO, Wiseinvest, a wealth management company. "They also find the mandate of restricted investment in equity attractive. If the equity component in the portfolio performs well, it would act as a kicker to the returns from the scheme. At the same time, they don't want to expose themselves to extra risk by allotting more to equity," he adds.

Investors can hope to get around 12% returns from these plans, a slightly superior returns than they could earn from traditionally safer investment avenues, say investment experts. According to Rustagi, conservative investors can look at debt-oriented products like monthly income plan, asset allocation plan and pure debt-oriented hybrid plans in the current market scenario.

Another reason why investors are going for hybrid schemes is they don't want to commit money for a longer period. "Many investors are still a bit concerned about the investment climate. They are not mentally prepared to stay in the market with a long-term commitment because of uncertainties in the economy," says a mutual fund manager, who doesn't want to be named. "Debt-oriented hybrid plans are ideal for these people because they invest in an actively managed debt portfolio with a minor exposure to equity and it is okay even if they have a time frame of one or two years," he adds.