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How balanced are BALANCED FUNDS?

How balanced are BALANCED FUNDS?

There is a general perception among investors that HYBRID MUTUAL FUNDS are safer. Many Risk averse investors particularly those who are retired and are looking for regular source of Income with higher returns than Fixed Deposits have been lured in investing in HYBRID MUTUAL FUNDS.

The period between Feb 21, 2020 – Mar 13, 2020 saw unexpected volatility, with almost all predictions going wrong. Here we present the performance of HYBRID MUTUAL FUNDS based on how they have been impacted as of 13th March, 2020.

3 Categories of Hybrid funds have been analysed

  1. Aggressive Hybrid Funds – Which have mandate to Invest 65% in Equity and 35% in Debt
  2. Conservative Hybrid Funds – Which have mandate to Invest 35% in Equity and 65% in Debt
  3. Balanced Advantage Funds or Dynamic Asset Allocation Funds – Which have mandate to change allocation to either as Aggressive or Conservative depending on proprietary rules/algorithms developed by Fund
1 Year Performance (Returns) of HYBRID MUTUAL FUNDS as on 13.3.2020
Aggressive Hybrid Conservative Hybrid Balanced Advantage
Nippon India Equity Hybrid Fund -24.53 Nippon India Hybrid Bond Fund -15.6 HDFC Balanced Advantage Fund -14.4
JM Equity Hybrid Fund -19.52 BOI AXA Conservative Hybrid Fund -9.62 SBI Dynamic Asset Allocation Fund -7.29
UTI Hybrid Equity Fund -13.90 UTI Regular Savings Fund -6.62 UTI Unit Linked Insurance Plan -6.95
Aditya Birla Sun Life Equity Hybrid ’95 Fund -12.31 Sundaram Debt Oriented Hybrid Fund -3.15 BOI AXA Equity Debt Rebalancer -6.8
Principal Hybrid Equity Fund -10.30 Aditya Birla Sun Life Regular Savings Fund -1.47 Principal Balanced Advantage Fund -3.34
IDFC Hybrid Equity Fund -10.13 Axis Regular Saver Fund -0.93 ICICI Prudential Balanced Advantage -3.32
HDFC Hybrid Equity Fund -9.70 Aditya Birla Sun Life Balanced Advantage Fund -3.01
ICICI Prudential Equity & Debt Fund -9.68 Invesco India Dynamic Equity Fund -2.68
Quant Absolute Fund -9.45 Union Balanced Advantage Fund -1.53
Baroda Hybrid Equity Fund -9.09 Nippon India Balanced Advantage Fund -1.43
BOI AXA Mid & Small Cap Equity & Debt Fund -8.67 L&T Balanced Advantage Fund -0.77
Tata Hybrid Equity Fund -8.25 Axis Dynamic Equity Fund -0.65
PGIM India Hybrid Equity Fund -7.89 Kotak Balanced Advantage Fund -0.25

 

It appears that more than 70% of the Hybrid mutual funds are giving negative returns for holding period of 1 Year as on 13th March 2020.

A Comparison of performance of Pure Debt and Equity Funds

1 Year Performance of Pure Debt and Equity Funds
Money Market Funds Large Cap Funds
Franklin India Savings Fund 7.85 Axis Bluechip Fund 6.25
L&T Money Market Fund 7.70 LIC MF Large Cap Fund 1.59
Aditya Birla Sun Life Money Manager Fund 7.61 Canara Robeco Bluechip Equity Fund 0.45
Nippon India Money Market Fund 7.57 BNP Paribas Large Cap Fund -0.73
UTI Money Market Fund 7.46 JM Large Cap Fund -3.32
Kotak Money Market Fund 7.46 IDBI India Top 100 Equity -4.74
HDFC Money Market Fund 7.44 Edelweiss Large Cap Fund -6.32
Sundaram Money Market Fund 7.39 HSBC Large Cap Equity Fund -6.7
Quant Money Market Fund 7.35 L&T India Large Cap -6.98
ICICI Prudential Money Market 7.34 Baroda Large Cap -7.05
Tata Money Market Fund 7.32 IDFC Large Cap Fund -7.42
SBI Savings Fund 7.27 UTI Mastershare -7.5
PGIM India Large Cap Fund -7.51
DSP Top 100 Equity -7.52
Invesco India Largecap Fund -7.58
Kotak Bluechip Fund -7.9

Most money market funds have given 1year return of above 7% and surprisingly some pure equity funds have not only given positive returns, some Large Cap funds seems to being giving lesser negative returns compared to Hybrid Funds.

Ok, if 1 year is not the benchmark and comparison has to be done over 5 Year performance

5 Year Performance of Pure Equity and Debt Funds as on 13.02.2020
Large Cap Money Market
Axis Bluechip Fund 8.34 L&T Money Market Fund 8.01
Mirae Asset Large Cap Fund 6.49 Franklin India Savings Fund 7.77
Canara Robeco Bluechip Equity Fund 6.09 Quant Money Market Fund 7.68
Indiabulls Bluechip 4.69 Aditya Birla Sun Life Money Manager Fund 7.65
HSBC Large Cap Equity Fund 4.33 Kotak Money Market Fund 7.58
Edelweiss Large Cap Fund 4.19 Nippon India Money Market Fund 7.58
LIC MF Large Cap Fund 4.13 UTI Money Market Fund 7.57
BNP Paribas Large Cap Fund 4.07 ICICI Prudential Money Maket 7.5
Invesco India Largecap Fund 4.02 SBI Savings Fund 7.43
Essel Large Cap Equity Fund 3.95 Invesco India Money Market Fund 7.39
ICICI Prudential Bluechip Fund 3.93 HDFC Money Market Fund 7.38
SBI Bluechip 3.87 JM Money Market Fund 6.96
Kotak Bluechip Fund 3.79 IDFC Money Manager Fund 6.94

Surprisingly, debt funds seem to be giving better returns even over 5-year period compared to Pure Equity funds

 

5 Year Performance of HYBRID MUTUAL FUNDS as on 13.03.2020
Aggressive Conservative Balanced Advantage
JM Equity Hybrid Fund -0.38 Nippon India Hybrid Bond Fund 1.86 BOI AXA Equity Debt Rebalancer 2.64
Nippon India Equity Hybrid Fund 0.49 BOI AXA Conservative Hybrid Fund 3.14 L&T Balanced Advantage Fund 2.88
PGIM India Hybrid Equity Fund 1.26 DSP Regular Savings Fund 4.48 HDFC Balanced Advantage Fund 3.25
LIC MF Equity Hybrid Fund 1.91 UTI Regular Savings Fund 4.49 Principal Balanced Advantage Fund 3.71
Tata Hybrid Equity Fund 2.11 Axis Regular Saver Fund 4.6 IDFC Dynamic Equity Fund 4.2
UTI Hybrid Equity Fund 2.25 Sundaram Debt Oriented Hybrid Fund 4.82 UTI Unit Linked Insurance Plan 4.21
Baroda Hybrid Equity Fund 2.64 HSBC Regular Savings Fund 5.2 Invesco India Dynamic Equity Fund 4.44
Aditya Birla Sun Life Equity Hybrid ’95 Fund 2.98 L&T Conservative Hybrid Fund 5.25 Nippon India Balanced Advantage Fund 5.01
Shriram Hybrid Equity Fund 3.45 Essel Regular Savings Fund 5.38 Edelweiss Balanced Advantage Fund 5.04
Quant Absolute Fund 3.47 Aditya Birla Sun Life Regular Savings Fund 5.45 ICICI Prudential Balanced Advantage 5.78
LIC MF ULIS 3.5 Franklin India Debt Hybrid Fund 5.5 DSP Dynamic Asset Allocation 5.96
Franklin India Equity Hybrid Fund 3.97 HDFC Hybrid Debt Fund 5.61 Aditya Birla Sun Life Balanced Advantage Fund 6.17
Edelweiss Aggressive Hybrid Fund 4.02 LIC MF Debt Hybrid Fund 5.61
L&T Hybrid Equity Fund 4.29 BNP Paribas Conservative Hybrid Fund 5.88
Kotak Equity Hybrid Fund 4.5 IDFC Regular Savings Fund 5.98
HDFC Hybrid Equity Fund 4.77 Canara Robeco Conservative Hybrid Fund 6
ICICI Prudential Equity & Debt Fund 4.92 SBI Debt Hybrid Fund 6.15
Sundaram Equity Hybrid Fund 5.54 Kotak Debt Hybrid Fund 6.66
Principal Hybrid Equity Fund 6.32 Baroda Conservative Hybrid Fund 6.71

 

Even in 5-year period, very few Hybrid funds seems to have given better returns compared to pure Debt Funds or Pure Equity Funds.

In conclusion, it appears that HYBRID FUNDS are neither able to contain negative returns in short period like 1 Year nor able to deliver better returns over long period like 5 Years.

Investors may be better of choosing either Pure Debt or Pure Equity. Further, Risk in Equity markets are rising even higher and Large Cap funds are not able to beat Money Market Funds even over 5 year time period.

DISCLAIMER: The owners/authors/publishers do not assume any responsibility for actions or non-actions taken by people who have read the content and no one shall be entitled to claim for detrimental reliance based upon any information provided or expressed herein. Your use of any information provided herein does not constitute any type of contractual relationship between yourself and the providers of this information. The owners/authors/publishers hereby disclaim all responsibility and liability for all use of any information in this material. Mutual funds are subjected to MARKET RISK and Investors are strongly recommended to read scheme documents before taking any Investment decisions

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