HDFC Hybrid Equity Fund: A good balance between returns and safety

HDFC Hybrid Equity Fund, launched in September 2000, has featured in the top 30 percentile of the aggressive hybrid fund category of CRISIL Mutual Fund Ranking (CMFR) for three consecutive quarters through March 2023.

Chirag Setalvad and Anupam Joshi have been managing the fund since April 2007 and October 2022, respectively.

The scheme’s investment objective is to generate capital appreciation/income from a portfolio, predominantly comprising equity and equity-related instruments.

The scheme also invests in debt and money-market instruments.

Trailing returns

The fund has consistently outperformed the benchmark (CRISIL Hybrid 35+65 — Aggressive Index) and its peers (funds ranked under the aggressive hybrid fund category in March 2023 CMFR) in all the trailing periods under analysis.

To put this into perspective, Rs. 10,000 invested in the fund on April 1, 2002, i.e., its inception, would have increased to Rs. 2.53 lakh on July 5, 2023, at an annualised rate of 16.3 per cent, compared to the category and the benchmark, which would have grown to Rs. 2.14 lakh (15.5 per cent per annum) and Rs. 1.57 lakh (13.7 per cent per annum), respectively.

A systematic investment plan is a disciplined mode of investing offered by mutual funds through which one can invest a certain amount at regular intervals.

A monthly investment of Rs. 10,000 over 10 years in the fund, totalling Rs. 12 lakh, would have grown to Rs. 24.33 lakh (13.72 per cent annualised returns), compared to Rs. 22.72 lakh (12.43 per cent annualised returns) in the benchmark as of July 5, 2023.

Portfolio analysis

Over three years, the fund’s asset mix has comprised a 70.83 per cent average allocation to equity and 29.17 per cent to debt.

The equity portfolio has been diversified across market capitalisations, with predominant exposure to large-cap stocks.

Allocation to large-cap stocks averaged 54.84 per cent in three years. Allocations to mid- and small-cap stocks averaged 6.72 per cent and 9.27 per cent, respectively.

The equity portfolio has been diversified across 27 sectors in three years. Banks have had the highest average allocation of 22.06 per cent, followed by software (6.69 per cent), petroleum products (6.49 per cent), construction projects (5.89 per cent), and finance (4.76 per cent).

Over three years, the debt portfolio of the fund has primarily comprised sovereign securities.

Allocation to sovereign papers averaged 13.35 per cent in three years. Exposure to securities rated AAA/A1+ averaged 7.74 per cent, while allocation to sub-AAA-rated securities averaged 6.44 per cent.

CRISIL Research