Best Conservative Hybrid Mutual Funds to Invest in 2021

If you are looking for a conservative fund with little exposure to equities for better returns, you can choose a good conservative hybrid fund. Here's a monthly update to our recommended list of conservative mixed funds. The good news is that there will be no menu changes in May.

These schemes invest mainly in debt instruments and a small part of their corpus in stocks. These schemes invest 75 to 90 percent of the group in debt instruments and 10 to 25 percent of the group in stocks or shares. A small exposure to equities helps these charts achieve slightly higher returns than pure debt schemes. However, exposure to equities makes it even riskier.

This is the reason why these schemes are recommended for conservative investors who are willing to have little exposure to equities for slightly higher returns than pure debt schemes. In other words, if you are a mutual fund investor and want to invest in stocks, but don't have the necessary risks to invest in a pure equity mutual fund system, you may consider investing in this category.

Conservative hybrid charts are more or less similar to previous monthly income plans or MIPs that used to invest a small part of the corpus in stocks. The problem with MIPs was that individual charts were used to decide equity exposure themselves. However, after a reclassification exercise by Sebi, the investment criteria for conservative hybrid schemes were clearly defined.

If you are a conservative investor looking to increase your returns with little exposure to stocks, you might consider investing in conservative hybrid schemes. However, keep in mind that equities are risky, especially in current market conditions. Do not invest in these schemes with a very short investment horizon. As you know, the stock markets are very volatile right now.

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Here are our recommended conservative hybrid schemes:

Best Hybrid Conservation Funds to Invest in 2021

  • ICICI Prudential Regular Savings Fund
  • Canara Rubeco Conservative Hybrid Fund
  • Kotak Debt Hybrid Fund
  • BNP Paribas Conservative Hybrid Fund

If you want to know how we choose these charts, you can take a look at our methodology below.

Methodology:

ETMutualFunds.com used the following parameters to shortlist mixed Hybrid Mutual fund Schemes.

  1. Mean Rolling Returns: Rolled daily for the last 3 years.
  1. Consistency for the last 3 years: Hurst Exponent, H is used to calculating the consistency of the fund. The exponent of H is a measure of randomness for a NAV series of a box. High H funds tend to show less volatility compared to low H funds.
  • When H = 0.5, the return series is said to be a Brownian geometric time series. This type of time series is difficult to predict.
  • When H <0.5, the series is said to mean-reverting.
  • When H> 0.5, the chain is said to be stationary. The higher the H value, the stronger the direction of the chain.
  1. Downside risks: We only consider the negative returns that the mutual fund scheme provided for this measure.

X = Returns less than zero

Y = sum of all squares of X

Z = Y / Number of days it takes to calculate the ratio

Downtrend risk = square root of Z.

  1. Outperformance
I) Equity Potion: Alpha Jensen measures it during the last three years. Alpha Jensen shows the risk-adjusted return generated by the mutual fund scheme relative to the expected return of the market through the Capital Asset Pricing Model (CAPM). An increase in alpha indicates that the portfolio has outperformed the market expected.

Average returns of the MF schemes =

[Risk-Free Rate + MF Scheme Beta Chart * {(Average Index Return - Risk Free Rate})

2) Debt Portion: Return of the fund - Benchmark return. The daily revolving returns are used to calculate the performance of the fund and benchmark and therefore the active return of the fund.

  1. Asset size: For hybrid funds, the minimum asset size is Rs 50 crore.
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