Categorization of Hybrid Mutual Fund Schemes

Posted by Aniruddh Bhilvare on February 07, 2020 · 3 mins read

As we know in previous article, SEBI has classified mutual fund schemes in the following categories:

  • Equity Schemes (10 categories)
  • Debt schemes (16 categories)
  • Hybrid Schemes (6 categories)
  • Solution Oriented Schemes (2 categories)
  • Other Schemes (2 categories)

In this article, we are going to learn about new categorization of Hybrid Mutual Fund Schemes. Hybrid funds invest in both Stocks and Debt instruments. This way, it can increase divercification and reduce concentration risk. Hybrid funds can provide higher returns than Debt funds due to Equity part in it.

As per SEBI, Hybrid schemes have been classified into 6 categories, the features of which along with the uniform scheme description have been given below:

# Schemes Characteristics Uniform Description
1 Conservative Hybrid Fund Invest 10% to 25% of total assets in equity & equity related securities and 75% and 90% of total assets in debt instruments An open ended hybrid scheme investing predominantly in debt instruments
2 Aggressive Hybrid Fund* Invest 65% to 80% of total assets in equity & related securities and 20% to 35% of total assets in debt securities An open ended hybrid scheme investing predominantly in equity and equity related instruments
2 Balanced Hybrid Fund* Invest 40% to 60% of total assets in equity & related securities and 40% to 60% of total assets in debt securities. No arbitrage will be allowed An open ended balanced scheme investing in equity and debt instruments
3 Dynamic Asset Allocation or Balanced Advantage Invest in dynamically managed equity or debt securities An open ended dynamic asset allocation fund
4 Multi Asset Allocation Invest in a minimum of three asset classes with a minimum allocation of 10% in each asset class An open-ended scheme investing in (names of the asset classes)
5 Arbitrage Fund Scheme following arbitrage strategy. Minimum investment in equity & equity related instruments-65% of total assets An open ended scheme investing in arbitrage opportunities
6 Equity Savings Invest at least 65% of the total assets in equity and its related securities and at least 10% of total assets in debt securities An open ended scheme investing in equity, arbitrage and debt
*Fund houses will be allowed to offer either a balanced fund or an aggressive hybrid fund.