Mirae Asset Hybrid Equity Fund: Focusing on Growth with Stability

Mirae Asset Hybrid Equity Fund is a cautiously managed scheme in the Aggressive Hybrid Fund category that has constantly appeared in the list of top-quartile performers in the category and stands strong against its large-sized peers.

Past performance is not an indicator of future returns
Data as on March 22, 2022
(Source: ACE MF)

Mirae Asset Hybrid Equity Fund has built an impressive performance track record in a relatively shorter time span. Since its inception, the fund has constantly figured among the list of top quartile performers across time periods, and has been well ahead of most of its prominent category peers. Over the last 3-year and 5-year period, the fund has outperformed the benchmark CRISIL Hybrid 35+65 - Aggressive Index by a decent margin of around 1-1.5 percentage points.

Mirae Asset Hybrid Equity Fund gives high emphasis to risk management. Although its Standard Deviation of 16.71 (indicating its volatility) is higher than the benchmark (14.62%), it is well below the category average (17.27%) and quite competitive to its peers. The fund has rewarded investors with remarkable risk-adjusted returns. Its Sharpe ratio (0.20) is far superior than the category average as well as the benchmark.

Investment strategy of Mirae Asset Hybrid Equity Fund

Classified under aggressive hybrid funds, Mirae Asset Hybrid Equity Fund is mandated to invest 65% to 80% of its assets in equities and 20% to 35% in debt instruments. The fund's equity investments are typically held in large-sized companies that help provide more stability and less price volatility to the fund. On the debt side, it retains the flexibility to invest across securities in the debt and money markets, but the ones that are rated investment grade.

Mirae Asset Hybrid Equity Fund's investment strategy is driven by valuation, earnings growth, and interest rate outlook. The fund holds a well-diversified portfolio without having a bias towards any particular theme, sector, or style while picking stocks for the portfolio.

Following a mix of the top-down and bottom-up approach to investing, the fund managers look for long-term investment opportunities in stocks of high-quality businesses that are available at reasonable prices. They follow a buy-and-hold investment strategy to benefit from long term growth potential of such stocks and offer decent capital appreciation to its investors.

Being an aggressive hybrid fund, Mirae Asset Hybrid Equity Fund usually holds around 70% to 75% of its assets in equities and the remaining in debt and cash. As on February 28, 2022, the fund held about 74.1% allocation in equities, investing in as many as 64 stocks. It held an allocation of 1% in Nifty 50 ETF, nearly 20% allocation to debt, while the remaining 4.9% was in cash equivalents.

The top 10 stock holdings together accounted for around 35.9% of its assets. HDFC Bank tops the list of stocks with an exposure of around 5.6%. ICICI Bank, Infosys, Reliance Industries, and Axis Bank are other stocks that feature among the top 5 holdings in the portfolio. Notably, most of its top holdings have remained the same over the last one year.

Mirae Asset Hybrid Equity Fund has benefitted from its holdings in Infosys, ICICI Bank, SBI, TCS, Tata Steel and Reliance Industries that have been the top contributors to its returns in the last one year. Stocks like Bharti Airtel, Sun Pharma, L&T, Maruti Suzuki India, etc. have been the other major contributors to its extraordinary performance.

Mirae Asset Hybrid Equity Fund's portfolio is diversified across as many as 20 different sectors. Banks lead with an allocation of around 17.7% in the portfolio, whereas it also holds another 9.8% into Financials. Infotech, Engineering, Consumption, Petroleum, Auto, and Pharma follow with an exposure of around 3% to 10%. The top 10 sectors in the portfolio together account for around 64.5% of the total assets.

The debt allocation in Mirae Asset Hybrid Equity Fund's portfolio is diversified across 36 debt instruments consisting of Sovereign rated G-secs, high rated Corporate Debt instruments along with Commercial Papers. It also holds significant exposure in cash equivalents. The fund usually maintains a high-quality debt portfolio, with an average maturity of around 3 to 5 years, which makes it moderately sensitive to interest rate changes.

Suitability

Mirae Asset Hybrid Equity Fund belongs to a fund house driven by stringent systems and processes. It does not resort to taking aggressive calls but maintains a diversified portfolio of quality high conviction stocks. The prudent investment strategies followed by the fund house has enabled it to beat the category average while keeping the risk at reasonable levels.

The fund's focus on quality high-growth companies may lead to a significant upside over longer investment time periods. Aggressive Hybrid Funds come with a 'moderate risk-moderate return' profile. Though the fund may witness slightly higher volatility during extreme market conditions, it can prove to be rewarding over complete market cycle.

Mirae Asset Hybrid Equity Fund is a suitable bet for investors with moderate risk profile looking for a well-managed aggressive hybrid fund with a time horizon of at least 3-5 years.

Warm Regards,
Divya Grover
Research Analyst

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Note: This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

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