Best Aggressive Hybrid Mutual Funds to Invest in 2021

When it comes to investing, it is advisable to avoid putting all your eggs in one basket. Meaning, one should diversify their investments across asset classes viz. equity, debt, etc. to mitigate the impact of volatility on the portfolio.

Hybrid mutual funds allow you to invest across equity and debt through a single fund, depending on your risk appetite. You can consider investing in various hybrid fund options such as Aggressive Hybrid Fund, Conservative Hybrid Fund, Balanced Advantage Funds, Equity Savings Fund, etc.

Of these, Aggressive Hybrid Funds invests predominantly in equities and equity related instruments along with meaningful exposure in debt securities (to reduce volatility). This approach provides you with the benefit of the upside potential of equity investment at a lower risk as compared to pure equity funds.

Aggressive hybrid funds could prove to be a worthy long term bet because investors benefit from the stability of debt investment as well as high growth potential of equities. If your investment objective is focused on gains across the universe of stocks, albeit at a lower risk, you can consider investing in an aggressive hybrid fund.

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What are aggressive hybrid funds?

Aggressive Hybrid Funds, also known as Equity Hybrid Funds, are open-ended hybrid schemes. The equity assets in this category of funds range between 65%-80% of its total assets, while debt instruments have an exposure of 20%-35% in the portfolio.

A combination of these asset classes offers a high level of diversification, hence, lowering the risk as compared to a pure equity funds. Given the high equity allocation, it becomes clear that Aggressive Hybrid Funds are not insulated from market volatility. However, with the cushioning of the debt portfolio, they are better equipped to minimise downside risk when compared to pure equity funds.

The equity investment can range across market capitalisation and sectors, depending on the investment mandate and strategy of the scheme. In terms of debt investment, the fund manager can invest across securities having different maturities and credit profile.

The fund managers of aggressive hybrid funds regularly rebalance the portfolio to maintain the mandated equity and debt allocation so that you, the investor, don't have to time the market to implement asset allocation strategy.

These funds, as an investment avenue, are typically suitable for investors with a moderately high risk appetite and those looking for capital appreciation in the long term, but do not have appetite for high volatility.

Table: Performance scorecard of Aggressive Hybrid Funds

Scheme Name Absolute (%) CAGR (%)
1 Year 2 Years 3 Years 5 Years 7 Years
Quant Absolute Fund 51.75 27.72 17.51 16.79 18.30
BNP Paribas Substantial Equity Hybrid Fund 29.58 23.44 16.48 -- --
Canara Rob Equity Hybrid Fund 28.21 20.45 14.83 16.98 17.71
Mirae Asset Hybrid Equity Fund 30.46 19.01 14.26 17.23 --
Kotak Equity Hybrid Fund 34.74 23.29 13.67 16.11 --
DSP Equity & Bond Fund 25.98 21.34 13.51 16.17 17.47
SBI Equity Hybrid Fund 23.66 18.77 13.10 14.98 16.99
Sundaram Equity Hybrid Fund 22.93 16.40 12.58 15.26 13.24
Edelweiss Aggressive Hybrid Fund 27.44 17.89 12.20 13.43 14.39
ICICI Pru Equity & Debt Fund 34.10 18.19 11.94 16.17 16.97
HDFC Hybrid Equity Fund 32.46 17.11 11.07 15.29 16.73
Aditya Birla SL Equity Hybrid '95 Fund 30.72 14.08 8.56 12.76 15.24
CRISIL Hybrid 35+65 - Aggressive Index 28.66 17.81 13.01 14.60 14.17
Data as on March 04, 2021
(Source: ACE MF)

*Please note, this table only represents the best performing Aggressive Hybrid Fund based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. Past performance is not an indicator for future returns. The percentage returns shown are only for an indicative purpose. Speak to your investment advisor for further assistance before investing.

Aggressive hybrid fund offers stability when market conditions turn volatile due to the debt component, while simultaneously participating in the market rally due to predominant equity portion. However, not all aggressive hybrid funds may be efficient in generating stable returns across market cycles. Therefore, you need to choose schemes prudently.

Best aggressive hybrid funds to invest in 2021:

Some of the best performing aggressive hybrid fund based on our analysis and research at PersonalFN are as follows:

These funds have shown superior performance and consistency on quantitative as well as qualitative parameters and have adequately compensated its investors for the level of risk taken.

Some of the other decent performers are:

  1. Kotak Equity Hybrid Fund

  2. Principal Hybrid Equity Fund

  3. Sundaram Equity Hybrid Fund

Here are the facets you need to look into to select the best Aggressive Hybrid Fund:

Quantitative Parameters:

Analyse the fund's consistency in performance across various market periods (bull and bear market phases) compared to the benchmark and category peers. While all funds may perform well during the bull phase, an important parameter while selecting an Aggressive Hybrid Fund is to determine its ability to manage the downside risk during tough market conditions.

Then determine whether the fund has rewarded its investors well for the risk they have taken using risk-reward ratios like Sharpe Ratio, Sortino Ratio, and Standard Deviation over a 3-year period.

When short listing funds for your portfolio, give preference to those funds that stand strong on risk-reward parameters.

Qualitative Parameters:

Qualitative parameters are often overlooked though they are a vital aspect in the selection process. It involves determining the quality of the portfolio and the efficiency of fund manager/house.

The fund house should have a significant performance record and must follow robust investment processes with adequate risk management systems in place.

And because the fund's performance is directly dependent on the ability of its fund manager, check the qualification and experience of the fund manager and the track record of the other schemes they manage.

Look at the fund's portfolio for how well diversified it is across stocks/sectors. Remember that a concentrated portfolio can expose you, the investor, to higher risk. Furthermore, if the fund has higher allocation to mid-caps and small-caps, it can prove to be a risky bet.

For the debt portion of the portfolio, check the credit profile of the underlying securities. The fund should hold predominant allocation to high quality papers to reduce the credit risk. Moreover, the fund should be well placed to rebalance the portfolio depending on the interest rate outlook.

Additionally, keep a tab on the churning rate of the securities in the portfolio because a high churning rate can make the portfolio prone to volatility and negatively impact the overall returns of the scheme. Analyse the portfolio's turnover ratio and expense ratio to assess how efficiently the fund controls the churning and limits the expenses.

Yes, we know that the above list is a lot for an average investor to look at. It involves number crunching and much of the data is not easily available in one place. But if you do need to narrow down on the top funds, these factors are of utmost importance.

Watch this short video on selecting mutual fund schemes:


At PersonalFN, we select and recommend mutual funds based on quantitative and qualitative parameters using our S.M.A.R.T Score Matrix:

  • S - Systems and Processes

  • M - Market Cycle Performance

  • A - Asset Management Style

  • R - Risk-Reward Ratios

  • T - Performance Track Record

The outlook for Aggressive Hybrid Fund in 2021:

The Indian economy, after contracting for two consecutive quarters reported a positive growth rate of 0.4% in Q3FY21. However, the recent resurgence in COVID-19 cases witnessed in many parts of the country has once again raised concerns about the sustainability of the economic recovery.

In addition, not all components of India's GDP are demonstrating growth. It is likely that the reading for the ensuing few quarters could slip back into a contraction, which means we could see a sort of 'W-shaped' recovery, where we would dip again before moving up.

Despite this, the equity market continues to trade at all time high supported by comfortable liquidity conditions. Consequently, the valuations in the Indian equity markets have turned expensive (trail P/E is around 35x) and the margin of safety across the market capitalisations appears to have narrowed. While the Union Budget 2021-22 announcements have set the bulls raging, the chances of intermediate corrections and high volatility cannot be ruled out.

Coming to the debt market, the government's borrowing plans, India's already high debt-to-GDP (currently at 70% of GDP), and higher fiscal deficit (which could prove inflationary) are concerning; it may push bond yields up. As you may be aware, bond prices and yields are inversely related. A surge in yield will impact bond prices negatively, thus causing a loss to the investors' value.

Therefore, going forward, debt securities, having exposure to longer maturity instruments, may be highly volatile going forward; while those focusing on shorter maturity instruments and following an accrual strategy may be still better-placed to tackle the interest rate risk.

Given the current scenario, it is advisable to be cautious with your investment approach. Invest only in those funds that are well poised to handle uncertain market conditions.

PS: If you wish to select worthy mutual fund schemes, I recommend that you subscribe to PersonalFN's unbiased premium research service, FundSelect.

Additionally, as a bonus, you get access to PersonalFN's popular Debt mutual fund research service, DebtSelect.

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Warm Regards,
Divya Grover
Research Analyst

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