Aggressive Hybrid Funds are equity-oriented hybrid funds that offer optimum diversification in terms of asset class by holding a mix of equity and debt instruments in their investment portfolio. A combination of these asset classes offers a high level of diversification, lowering the risk as compared to pure equity funds. The equity allocation 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.

Given the high equity allocation, it is apparent 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 vis-a-vis diversified equity funds.

[Read: 5 Best Aggressive Hybrid Funds to Invest in 2023]

HDFC Hybrid Equity Fund is a process-driven Aggressive Hybrid Fund known for its prudent risk management techniques. The fund has bounced back with superior gains after recording a pro-longed underperformance.

Growth of Rs 10,000 if invested in HDFC Hybrid Equity Fund 5 years ago

Graph 1

Past performance is not an indicator of future returns
May 31, 2023
(Source: ACE MF) 

HDFC Hybrid Equity Fund, erstwhile HDFC Balanced Fund is one of the most popular Aggressive Hybrid Funds having a corpus of Rs 19,439 crore. Launched way back in September 2000 as a Balanced Fund, HDFC Hybrid Equity Fund has a history of over two decades to its credit. While HDFC Hybrid Equity Fund holds a mix of equity and debt in its portfolio, it uses sound risk management processes to deal with the excess market volatility. The fund is known for its ability to capitalise well on market rallies and generate superior risk-adjusted returns for its investors. Notably, the fund struggled to keep pace with the benchmark and many of its peers during the 2020 market correction which affected its short-term performance. Nonetheless, with the subsequent recovery and rally witnessed in the equity market, HDFC Hybrid Equity Fund’s performance has significantly improved in the last couple of years. Over the last five years, HDFC Hybrid Equity Fund has delivered a decent performance and has managed to generate returns slightly higher than the benchmark CRISIL Hybrid 35+65 – Aggressive index. An investment of Rs 10,000 invested in HDFC Hybrid Equity Fund 5 years back would have appreciated at around 12.5% CAGR to Rs 17,983. A simultaneous investment in the benchmark index would now have been valued at Rs 17,318 growing at 11.6% CAGR.

HDFC Hybrid Equity Fund’s performance vis-á-vis category peers

Scheme Name Corpus (Cr.) 1 Year 2 Year 3 Year 5 Year 7 Year Std Dev Sharpe
Quant Absolute Fund 1,150 10.85 12.99 35.28 19.64 16.69 15.77 0.50
ICICI Pru Equity & Debt Fund 22,145 14.07 17.50 29.29 15.52 16.24 13.93 0.46
Kotak Equity Hybrid Fund 3,468 13.26 11.31 26.67 13.72 13.89 11.80 0.49
HDFC Hybrid Equity Fund 19,439 17.19 12.16 25.80 12.45 13.62 12.42 0.44
UTI Hybrid Equity Fund 4,441 14.84 11.88 25.28 10.95 12.10 12.28 0.45
Franklin India Equity Hybrid Fund 1,374 13.00 9.01 22.38 11.10 11.69 12.32 0.38
Mirae Asset Hybrid Equity Fund 7,188 12.87 9.70 21.78 13.04 14.23 11.96 0.38
Aditya Birla SL Equity Hybrid '95 Fund 7,071 8.78 7.37 21.66 8.54 10.36 12.27 0.35
DSP Equity & Bond Fund 7,389 13.66 7.87 20.64 11.85 12.96 12.77 0.33
Canara Rob Equity Hybrid Fund 8,445 12.62 9.45 20.24 12.97 14.01 11.23 0.36
CRISIL Hybrid 35+65 – Aggressive Index 11.49 8.52 19.25 11.60 12.27 10.64 0.35

The securities quoted are for illustration only and are not recommendatory
Returns are point to point and in %, calculated using the Direct Plan-Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on May 31, 2023
(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 before investing. Past performance is not an indicator for future returns. The percentage returns shown are only for indicative purposes.

HDFC Hybrid Equity Fund has a track record of outpacing the CRISIL Hybrid 35+65 Aggressive index by a noticeable margin in the past. However, the fund’s performance suffered during the market sell-off of early 2020 wherein it trailed the benchmark and many of its category peers. Nonetheless, HDFC Hybrid Equity Fund made a strong comeback once the market started trending upward in the later part of 2020. In the last 1-year, 2-year, and 3-year periods HDFC Hybrid Equity Fund has outpaced the CRISIL Hybrid 35+65 Aggressive index and many of its prominent peers by a noteworthy margin. The significant improvement in the performance of the fund in recent years has improved its track record over longer time frames.

In terms of risk-reward parameters, while the volatility registered by HDFC Hybrid Equity Fund is competitive to the category average, it is higher than the benchmark. With the recent bounce back in performance, HDFC Hybrid Equity Fund has shown significant improvement in its risk-adjusted returns, as denoted by the Sharpe Ratio, which is currently among the best in the category.

Investment strategy of HDFC Hybrid Equity Fund

Being an Aggressive Hybrid Fund, HDFC Hybrid Equity Fund is mandated to invest 65% to 80% of its assets in equities and 20% to 35% in debt instruments. HDFC Hybrid Equity Fund allocates around 65-70% of its assets in equities along with 20- 30% in debt and the balance in cash. While picking stocks, the fund manager looks to invest in businesses with reasonable growth prospects, sound financial strength, sustainable business models, and that are available at a reasonable valuation.

The fund follows the bottom-up approach to identify high-quality growth-oriented stocks for the long term. While the fund has the flexibility to invest the equity portion of its portfolio across market capitalisation, it maintains higher allocation to large caps along with significant diversification to mid and small caps. It usually holds around 35-40 stocks in the portfolio and follows a ‘buy-and-hold’ strategy, where the equity portion of the portfolio is not churned often. This highlights the high conviction the fund manager has in its holdings.

Under debt, the fund holds the flexibility to invest across duration and credit profiles. The debt portion of the portfolio is spread across a range of debt instruments, with a preference towards high-rated instruments and G-Secs. Investments in debt securities are guided by credit quality, liquidity, interest rates, and their outlook.

Top portfolio holdings in HDFC Hybrid Equity Fund

Graph 2Graph 2

Holding in (%) as of April 30, 2023
(Source: ACE MF) 

HDFC Hybrid Equity Fund holds its equity exposure across market caps but with a large cap bias. As of April 30, 2023, HDFC Hybrid Equity Fund held 33 stocks in its portfolio with the top 10 stocks accounting for 42.7% of its assets. Top blue chip names like ICICI Bank, HDFC Bank, ITC, Reliance Industries, and HDFC Ltd. currently form part of HDFC Hybrid Equity Fund’s top holdings. Most of these stocks have been among the core holdings in the portfolio for quite a long time. HDFC Hybrid Equity Fund follows a buy-and-hold investment approach and accordingly, the fund usually has a low portfolio turnover ratio of less than 20%.

In the last two years, HDFC Hybrid Equity Fund has benefited immensely from its prominent exposure to stocks like ICICI Bank, ITC, Bharat Electronics, L&T, SBI, and HDFC Bank. HDFC Hybrid Equity Fund also benefitted from its holdings in Bank of Baroda, SKF India, Bharti Airtel, Reliance Industries, Power Grid Corporation, Mahindra Holidays & Resorts India, Redington, Persistent Systems, HDFC Ltd., and Axis Bank, among others.

HDFC Hybrid Equity Fund favours Cyclical and Sensitive sectors along with strategic allocation towards Defensives. Around 25.8% of HDFC Hybrid Equity Fund’s portfolio is inclined towards financial services which includes Banking at 21.6% and Finance at 4.3%. Engineering, Infotech, Petroleum, Consumption, and Power stocks follow with an allocation in the range of 4-8% of its assets. HDFC Hybrid Equity Fund also holds diversification in Telecom, Hotels, Chemicals, Healthcare, Pharma, and Construction, among others.

On the debt side, HDFC Hybrid Equity Fund predominantly holds exposure to Corporate Debt Instruments (13.9%) having moderate to high credit ratings and Sovereign rated G-Secs (16.5%). The fund adjusts the maturity profile of the debt portion in line with the interest rate outlook which enables it to do well across interest rate cycles. The average maturity of the debt portfolio is currently around 5.5 years which makes it moderately sensitive to interest rate changes.


In its history of over two decades, HDFC Hybrid Equity Fund holds a reliable track record of delivering decent risk-adjusted returns over longer time periods. Though the fund was under pressure for quite some time and even disappointed investors in terms of containing downside risk during the 2020 market crash, it made a remarkable comeback which helped improve its overall performance track record. The fund has the ability to do well across various market phases and cycles.

HDFC Hybrid Equity Fund maintains a well-diversified portfolio of quality instruments across the equity and debt segment which enables it with the potential to deliver over complete market cycles. This strategy enables it to generate decent risk-adjusted returns for its investors in the long run. The fund manager Mr Chirag Setalvad, who has been managing the original balanced fund for well over a decade now, takes high-conviction bets and prefers to hold the investments and allocation for the long term.

HDFC Hybrid Equity Fund is suitable for Investors looking for a relatively stable and reliable fund in the Aggressive Hybrid Fund category that is driven by stringent processes with a long-term view of 3-5 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.

This article first appeared on PersonalFN here

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