Aggressive hybrid mutual funds gain traction; add 3.5 lakh investors in last 1 year

New Delhi: Aggressive hybrid mutual funds have been gaining traction among investors amid continued volatility in the capital markets, with the asset base of the category surging to Rs 2.26 lakh crore in April 2025, an increase of 12 per cent compared to a year ago.

Also, the investor base expanded significantly, with the number of folios increasing by 3.5 lakh over the past year, to nearly 58 lakh by April 2025, latest data with the Association of Mutual Funds in India (Amfi) showed.

This trend highlights the growing appeal of a balanced investment approach that combines growth and stability.

Aggressive hybrid funds, an investment solution blending equity and debt exposures, delivered robust returns over different timeframes. On average, these funds have delivered returns of nearly 9 per cent over the past year, 20 per cent over two years, 15 per cent over three years, and an impressive 21 per cent over five years, the industry data showed.

These funds differ from other hybrid mutual funds primarily in the equity exposure, as they invest 65-80 per cent in equities higher than the conservative or balanced hybrids that offer better return potential but also higher risk, making them ideal for investors with a moderate risk appetite and a 3-5 year view, Trivesh D, COO Tradejini, said.

Looking ahead, the outlook for actively managed aggressive funds remains positive. Market movements are increasingly expected to be sector-specific and stock-specific rather than broad-based. As a result, fund managers with a dynamic and responsive approach will be better positioned to capture emerging opportunities.

"With the market expected to move more on sector-specific and stock-specific developments rather than broad-based rallies, fund managers with a dynamic approach will be better positioned to capture emerging opportunities," Santosh Joseph, CEO, Germinate Investor Services, said.

According to the Amfi data, the asset base of aggressive hybrid funds rose from Rs 2.02 lakh crore in April 2024 to Rs 2.26 lakh crore in April 2025, marking a 12 per cent growth year-on-year.

There is a surge in retail interest in the category as investors seek balanced, tax-efficient products especially after Sebi's F&O tightening, Trivesh said.

Performance-wise, industry data shows that 31 aggressive hybrid mutual funds, on an average, delivered returns of close to 9 per cent over the last one year.

Some of the performers include DSP Aggressive Hybrid Fund, Bandhan Aggressive Hybrid Fund, Mahindra Manulife Aggressive Hybrid Fund, Invesco India Aggressive Hybrid Fund, and SBI Equity Hybrid Fund. These five funds generated returns of 12-18 per cent over the past year (as of April 30), and between 19-24 per cent over the last two years.

Over a five-year horizon, returns ranged between 18.5-24 per cent with the Mahindra Manulife Aggressive Hybrid Fund delivering the highest return at 23.62 per cent.

For instance, Mahindra Manulife Aggressive Hybrid Fund's performance is rooted in a well-structured, balanced allocation strategy. The fund is overweight in large-cap equities, especially in sectors like banking, consumer durables, and construction materials, which offer both stability and growth potential.

On the other hand, it maintains a cautious approach toward more volatile and global facing sectors like IT, oil & gas, and metals.

In addition to its equity strategy, the fund's debt allocation offers a built-in safety net. This component could further benefit from a potential bond market rally, especially if policy rate cuts are announced.

Experts believe aggressive hybrid funds give investors best of both worlds; stability from the debt component when equity markets are volatile and opportunity to ride the economy's growth through the equity component.

"Given the current market dynamics, aggressive hybrid funds offer a stable yet rewarding path forward for both new and experienced investors," said Sunita Satapathy, Director, Glosome Wealthx.

Further, from a taxation standpoint, these funds enjoy the advantage of being treated as equity-oriented schemes. This makes them particularly attractive for long-term investors looking to optimize capital gains tax.

Experts recommend using a Systematic Investment Plan (SIP) to invest in such funds, as it helps average out market volatility and instills investment discipline. They typically suggest allocating 15-25 per cent of an investor's portfolio to hybrid funds, depending on risk appetite.

Overall, the hybrid category's asset base grew 21 per cent year-on-year to Rs 9.15 lakh crore as of April 2025 and added over 22 lakh folios to 1.58 crore during the period.