Investors looking to gain from investment across the universe of stocks but at a lower risk can consider investing in aggressive hybrid fund that invest predominantly in equities along with meaningful exposure in debt instruments to reduce volatility.

Mirae Asset Hybrid Equity Fund (MAHEF) is one such aggressive hybrid fund that invests in a mix of equity and debt instruments with an aim to appreciate wealth.

Launched in July 2015, the fund is among the latest entrants in the aggressive hybrid fund category managing an asset size of Rs 3,190 crore. The equity portion of the fund is managed by Mr Neelesh Surana (since inception) while Mr Mahendra Jajoo (since September 2016) manages the debt portion.

Graph 1: Growth of Rs 10,000 if invested in Mirae Asset Hybrid Equity Fund since inception Graph 2: Mirae Asset Hybrid Equity Fund's year-on-year performance

Table: Mirae Asset Hybrid Equity Fund's performance vis-a-vis category peers

Returns are on a rolling basis and in %, calculated using Direct Plan - Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on February 05, 2020
(Source: ACE MF) *Please note, this table only represents the best performing funds 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 indicative purposes.

MAHEF outperformed the benchmark and category average across rolling period. Its outperformance when compared to the category average is in the range of 3-5 percentage points, while when compared to the benchmark it is in the range of 2-3 percentage points.

In fact, MAHEF was the category topper on 2-year and 3-year rolling return basis. The other top performers during the period were Canara Rob Equity Hybrid Fund, Sundaram Equity Hybrid Fund, and SBI Equity Hybrid Fund.

In terms of risk-return profile, the fund's volatility has been slightly lower than the category average, though higher than the benchmark. However, the fund's risk-adjusted return as denoted by Sharpe ratio is among the best in the category.

Investment strategy of Mirae Asset Hybrid Equity Fund

Categorised as aggressive hybrid fund, MAHEF invests predominantly in equity and equity related instruments. It can invest up to 35% of its assets in debt and money market instruments. The fund's equity and debt allocation is influenced by valuation, earnings growth and interest rate outlook.

For the equity portion, the fund aims to build a diversified portfolio of strong growth companies available at reasonable price. The fund has the flexibility to invest across market capitalisation, theme or investment styles. It invests in companies that are likely to benefit from macroeconomic, industry and sectoral trends after doing bottom up analysis and due diligence.

For the debt portion, the fund has the flexibility to invest across all the securities in the debt and money markets with more emphasis on highly rated instruments. The fund follows a top down approach for taking interest rate view, sector allocation along with a bottom up approach for security/instrument selection. The portfolio maturity is actively managed in line with the interest rate outlook.

Graph 3: Portfolio allocation and market capitalisation trend in Mirae Asset Hybrid Equity Fund

Graph 4: Top portfolio holdings in Mirae Asset Hybrid Equity Fund

Holding (in %) as on December 31, 2019
(Source: ACE MF)  

As on December 31, 2019, MAHEF held a diversified portfolio of 53 stocks. The top 10 stocks which include top large cap names constitute 37.6% of its portfolio. HDFC Bank tops the list with an allocation of 6.5%, followed by ICICI Bank at 5.1%, Reliance Industries and SBI at 4.3% each. Rest of the stocks in the top 10 holding have allocation in the range of 2.5-3%.

In terms of sectors, the fund has the highest exposure to Banking of 21.8% with another 6.6% in Finance. The other prominent sectors in the portfolio are Infotech, Consumption, Petroleum products, Pharma, Engineering, Auto, etc.

The fund's debt portion predominantly includes investment in commercial paper (8.7%), government securities (7.9%) and corporate debt (3.9%). Having an average maturity of 6.62 years and modified duration of 4.88 years, the yield-to-maturity of the debt portfolio is at 7.12%.

Top contributors

Among the stocks in the portfolio, ICICI Bank, HDFC Bank, Reliance Industries contributed the most to the fund's gains in the last one year with a weighted return of around 5%. The fund also gained from its holdings in Axis Bank, Info Edge (India), Kotak Mahindra Bank, Tata Global Beverages, among others.

On the other hand stocks like ITC, L&T, Aurobindo Pharma, Tata Steel, Ceat, ZEEL, etc. eroded some of its gains.

Suitability Mirae Asset Hybrid Equity Fund

MAHEF maintains a well-diversified portfolio of stocks which has enabled it to reward investors at reasonable level of risk. The fund's investment in equities across market capitalisation as well as debt instruments of varying maturity can help it take advantage of dynamic market conditions. MAHEF aims to maintain a large base of stocks to avoid concentration risk. However, both equity and debt as asset class carry various risks. This makes MAHEF suitable for investors with moderately high risk appetite and investment horizon of at least 5 years.

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.

Editor's note: The last few years have not been among the best for equity mutual funds. While most funds have underperformed or are struggling to match the returns of the benchmark, there are few funds that have the potential to constantly generate alpha for its investors. And we have identified five such high alpha generating funds, in our latest report 'The Alpha Funds Report 2020'. Do not miss our latest research finding. Get your access to this exclusive report, right here!

 

DISCLOSURE AS PER SECURITIES AND EXCHANGE BOARD OF INDIA (RESEARCH ANALYSTS) REGULATIONS, 2014

About the Company including business activity

Quantum Information Services Private Limited (QIS) was incorporated on December 19, 1989.

QIS was promoted by Mr Ajit Dayal with an objective of providing value-based information/views on news related to equity markets, the economy in general, sector analysis, budget review and various personal products and investments options available to the Public. It was the first company to start equity research on an institutional level.

'PersonalFN' is a service brand of QIS and was started in the year 1999. In 1999, the Company registered the Domain name www.personalfn.com for providing information on mutual funds and personal financial planning, financial markets in general, etc. and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services.

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Details of associates

1. Money Simplified Services Private Limited;

2. PersonalFN Insurance Services India Private Limited;

3. Equitymaster Agora Research Private Limited;

4. Common Sense Living Private Limited;

5. Quantum Advisors Private Limited;

6. Quantum Asset Management Company Private Limited;

7. HelpYourNGO.com India Private Limited;

8. HelpYourNGO Foundation;

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10. Primary Real Estate Advisors Private Limited;

11. HYNGO India Private Limited;

12. Rahul Goel;

13. I V Subramaniam.

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1. ‘subject company’ is a scheme on which a buy/sell/hold view or target price is given/changed in this Research Report;

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Quantum Information Services Private Limited CIN: U65990MH1989PTC054667 Regd. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021 Corp. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021.

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