Back-to-back launches in balanced hybrid space as MFs explore new options

Whiteoak Capital Mutual Fund on Thursday became the second fund to launch a scheme in the balanced hybrid category, which has a stiffer asset allocation structure compared to a balanced benefit.

Balanced hybrid funds must maintain a minimum allocation of 40 percent to both equity and debt, while balanced benefit fund managers have the flexibility to maintain an asset mix in any proportion. However, most balanced funds maintain an equity allocation of at least 65 percent due to tax considerations.

Balanced hybrid funds are eligible for the earlier debt tax, where returns are taxed at 20 percent with indexation benefits for an investment period of more than three years.

According to the fund house, the fund structure has been proven to deliver reasonable returns with lower intermittent volatility.

“Investors often make mistakes when exposed to extreme market conditions or asset classes. Ultimately, they generate suboptimal returns from investments due to significant intermittent volatility. One of the simple yet effective strategies they can follow is the ‘balanced approach’ of having growth assets (equities) and stability (debt) in the portfolio,” said Prateek Pant, CBO, WhiteOak Capital AMC.

Last month, 360 ONE launched the first balanced hybrid fund.

The hybrid sector has seen a surge in launches in recent months as fund houses expect these products to gain more traction following the change in debt tax.