For long-term investors, allocating capital into hybrid mutual funds can be a suitable option as it’s a lower risk investment with steady returns, according to experts.
“Mutual funds are playing the role of a quasi-bank,” DP Singh, deputy managing director and joint chief executive officer at SBI Mutual Fund, told NDTV Profit.
Hybrid funds come in various categories—conservative hybrid, multi-asset, arbitrage, equity savings, and equity hybrid.
“For long-term investors, it has to be the hybrid (fund), starting with conservative hybrid (fund)… I think this is the best bet for people who are having a little risk appetite and having a horizon of three years plus,” he said.
Rajeev Radhakrishnan, SBI MF’s chief investment officer–fixed income, said an investor should be made aware of the portfolio in a hybrid fund, which has about 65-70% invested in equity, while 25% is debt-oriented.
Hybrid funds are actively managed and the investor base is largely weighted, he said. “So, the internal portfolio liquidity becomes less of a constraint as compared with a pure debt-oriented institutional product.”
Fund houses have dedicated mangers for equity and debt portfolio “and within the internal template norms—which basically govern the extent of credit and duration risk that you take in your bond portfolio—the portfolio manager has sufficient flexibility”, he said.
Singh explained that among solution-oriented funds, there are two types—children benefit fund and retirement benefit fund.
In the first category, the horizon of investment is either 10-15 years or longer, and hence, the fund manager can take a logical long-term call on the portfolio.
“So, there is no liquidity pressure, there is no redemption pressure. So, you can move into the companies which are going to give very good returns over a longer period… We have seen that the funds generally have given very, very good returns,” he said.
About the retirement benefit fund, Singh said as people live longer due to socio-economic progress, their requirements can be fulfilled via the systematic withdrawal plan or the SWP route.
“When we come to solution settings, there are many number of funds and a number of solutions depending on individual needs. We can have so many solutions knitted. So, financial advisors can definitely help the investors in doing that,” he said.
