Hybrid Mutual FundsHybrid Mutual Funds

Ventura Securities Ltd.

What is a Hybrid Mutual Fund ? A Hybrid Fund is a type of Mutual Fund which invests in a

combination of equity and bonds.

Hybrid mutual funds allocate their assets both into equity and fixed-income assets to seek higher returns while minimizing risk.

Amongst the various mutual fund categories, hybrid funds is one category which can combine the benefit of equity and debt, and relieve you from the worry of tactical asset allocation.

Switching between assets based on market conditions To more aggressive growth oriented stocks when the

market is bullish To a greater proportion of fixed income when interest

rates are high

Diversity of portfolio Growth from stocks Safety from bonds

Professional management Fund manager with research team manages your

money

Advantages of Hybrid Mutual Funds:

Types of Hybrid Funds Hybrid – Equity Oriented

Balanced Fund Arbitrage Fund

Hybrid – Debt Oriented Hybrid - Debt Oriented Monthly Income Plan – Aggressive Monthly Income Plan – Conservative

Hybrid – Close Ended Capital Protection Oriented Fund Others

Hybrid – Equity Oriented Funds Balanced Fund

Invests mainly in equity (more than 65%) and a part in fixed-income assets to seek higher returns while minimizing risk.

Combines benefits of both growth and income. Arbitrage Fund

Benefits from the difference in price in the cash and derivatives market for generating returns.

Tax Treatment: Hybrid – Equity Oriented category invests at least 65% in equity, hence they

are eligible for tax treatment as similar to equity mutual funds. Dividend income and long term capital gains (units sold after a holding

period of one year) are exempted from tax. 15% of short term capital gain tax is applicable if the units are sold within a

year.

Hybrid – Debt Oriented Funds

Hybrid - Debt Oriented Fund Allocation into equity- maximum of 40% of their corpus and remaining

into debt instruments (money market instruments, long term and short term bonds).

Investments in debt instruments protect the portfolio from downside movements in equity, which works towards attaining growth.

Monthly Income Plans Invests a small portion of their portfolio (10% to 30%) into equities and

the remaining in debt and money market instruments. Offers regular returns either in terms of dividend or capital appreciation. MIP are of two types

Aggressive – Schemes which invest around 25% to 30% in equities Conservative - Schemes which hold around 10% to 15% in equities

Hybrid – Debt Oriented Funds

Tax Treatment:

Since Hybrid-Debt oriented schemes invest in equities less than 65% of the assets, they are considered as debt funds from taxation perspective.

DDT of 28.84% (including education cess and surcharge) for individuals is deducted from the dividend paid by the schemes.

Long-term capital gains (redemption after 3 years) from these funds are taxed at 20% with indexation.

Short-term capital gains are taxed at the marginal income tax rate for the investment redeemed within 3 years from the date of allotment.

Hybrid – Others Capital Protection Oriented Fund

Aim to protect the principal amount by investing a part of it in fixed-income instruments such as bonds, T-bills and certificates of deposits (CDs). The rest is invested in equities.

Closed-end schemes.

Tax Treatment: Since these schemes invest in equities less than 65% of the assets, they

are considered as debt funds from taxation perspective. Long-term capital gains (redemption after 3 years) from these funds are

taxed at 20% with indexation. Short-term capital gains are taxed at the normal income tax rate for the

investment redeemed within 3 years from the date of allotment.

Suitable for investors who are new to equity investments

Diversification across asset classes Posting balanced returns Low volatility and low correlation to the broad

equity markets. Investors can receive income periodically Hybrid – Equity Oriented schemes are tax efficient

How does a Hybrid strategy help investors?

Recommended Balanced Funds:

Returns as on 12th October 2015 Source: Accord Fintech

Scheme Name NAV (Rs.)

6 Mths 1 Yr 3 Yrs 5 Yrs

AUM Exit Load Exit

Period

Large Cap

Mid Cap

Small Cap

(Rs. in Crs) (%) (%) (%) (%)

Hybrid - Equity oriented:HDFC Balanced Fund 108.82 -1.6 13.61 20.48 13.94 4,570 1 1Y 47.11 13.67 6.72SBI Magnum Balanced Fund 95.2 -2.69 15.21 21.73 11.85 2,588 1 12M 41.01 9.01 13.51

Tata Balanced Fund 170.08 -3.01 17.84 21.6 14.4 4,661 1 365D 53.12 13.64 6.69Category: Benchmark CNX Nifty Index -7.95 3.14 12.72 5.46

NA Crisil Balanced Fund Index -3.57 6.49 11.73 6.86

S&P BSE SENSEX -7.57 1.75 12.85 5.35

Recommended MIPs:

Returns as on 12th October 2015 Source: Accord Fintech

Scheme Name

NAV3

Mths6

Mths 1 Yr 3 Yrs 5 Yrs

AUM Exp ExitExit

Period(Rs.) (Rs. in

Crs)

RatioLoad (%) (%)

Monthly Income Plans (MIPs):Birla SL MIP II-Wealth 25 29.99 6.06 2.69 14.36 14.39 10.89 1,013 1.88 1 1095DFranklin India MIP 44.44 6.6 3.88 12.38 12.39 9.95 430 2.28 1 1YIDFC MIP 17.01 5.66 3.19 11.73 11.41 9.57 254 2.3 1 1YSBI Magnum MIP 31.17 10.57 6.21 13.8 10.78 9.14 289 2.08 - 1YCategory: Benchmark Crisil MIP Blended Index 2.50 2.72 10.90 9.81 8.27 NA

Conclusion:

Hybrid funds combine the power of equities (shares) and the stability of debt market instruments (fixed return investments like bonds) and provide both income and capital appreciation while avoiding excessive risk.

A hybrid fund is suitable for investors looking for a combination of safety, income and modest capital appreciation.

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Thank you!Email – mfcustomercare@ventura1.comContact Us – +91 22 67747577/67547046