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Axis Equity Hybrid Fund : Meaning, Costs involved and More

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1. What is Axis Equity Hybrid Fund?

Axis Mutual Fund house has recently launched a New Fund Offer (NFO) named as Axis Equity Hybrid Fund.

It is an open ended hybrid scheme which aims to generate long term capital appreciation along with income over medium to long term horizon. The fund manager will invest in equity and equity related securities along with debt and money market instruments. Equity helps to ride the growth wave and enhances the potential to earn higher returns. Fixed income/debt provides stability to the portfolio by being less volatile and generating income regularly.

The investment strategy is dependent on current market outlook and may change at the option of the fund manager. The scheme doesn’t assure or guarantee the achievement of investment objective of the fund. The scheme is available as a direct plan as well as a regular plan of the mutual fund. Additionally, both the variants are available in growth option and dividend option. The New Fund Offer (NFO) period is from 20th July 2018 and continues till 3rd August 2018.

2. Where does the scheme invest your resources?

As an investor, it is very important to know the asset allocation strategy of the scheme. It basically explains in which securities your money will be invested and in what proportion. The scheme invests 65-80% in equities and 20-35% in debt. The fund manager will use a multi-cap bottom up strategy for picking stocks related to fast growing sectors. It will be predominantly inclined to large-cap stocks with up to 30% investment in mid-cap stocks.

As regards debt component, the fund will follow a tactical approach across sovereign bonds and corporate bonds.The portfolio duration and credit exposures will be determined after doing a thorough research. Following an active duration management, the fund attempts to invest in the entire range of debt instruments across credit/duration spectrum.

3. How much does it cost to invest in the scheme?

The minimum application amount to purchase the units of the scheme has been fixed at Rs. 5,000/- and in multiples of Re. 1/- thereafter. The minimum additional purchase amount is fixed at Rs.100 and in multiples of Re. 1/- thereafter. The scheme charges an exit load of 1% if you redeem/switch investments on or before 12 months from the date of allotment. This load will be charged on over and above the 10% of investment.

There are no exit loads if redemption/switching takes place after 12 months from the date of allotment. The scheme considers CRISIL Hybrid 35+65 – Aggressive Index as the benchmark to compare performance of the fund. The fund managers of the scheme are Shreyash Devalkar & Ashish Naik (Equity) and R Sivakumar (Debt) respectively.

4. What are the risks involved in the Scheme?

As an investor you need to be aware of the risks involved in investing in this scheme. The scheme might be exposed to the following risks:

  • Investments in equity and equity related securities is a risky proposition. Investors should take into account their risk appetite before making any decision.
  • To earn attractive yields, the fund manager may invest in unlisted securities which might increase the risk of the portfolio. Additionally, it may also affect the valuation of the scheme investments.
  • The liquidity of the equity and equity related investments made by the fund may be constrained by the trading volumes, settlement periods and transfer procedures.
  • The Net Asset Value (NAV) of the fund may change subject to market risks arising due to price and volume volatility in the capital markets, interest rates, currency exchange rates, changes in the Government policies and other political and economic developments.
  • The past performance of the fund needs to be considered as a reference. It does not, however, guarantee future performance of the Scheme.

5. What are benefits of the Scheme?

Being a hybrid scheme, it would give you best of both worlds. Apart from higher risk-adjusted returns, the scheme offers the following benefits:

  • Asset allocation

    This happens to be the key ingredient of successful investing. By having a balanced asset allocation, the scheme provides confidence to the investor through ups and downs of the market. You would benefit from active management to earn higher returns as compared to investing in pure debt funds.

  • Risk managed through lower correlation

    The correlation between asset classes in a portfolio influences the quantum of returns earned. You need to know that all asset class do not move in the same direction at all times. A higher correlation would increase the portfolio sensitivity to market movements and make it more risky. Conversely, a lower correlation among assets enhances gains on account of diversification. It functions like a hedge during market ups and downs and optimizes return.

  • Re-balancing advantage

    The fund manager will re-balance the portfolio periodically to diminish the tendency of portfolio risk crossing the acceptable limit. This would involve bringing the out of proportion asset classes back to target asset allocation. This reduces the overall risk and keeps fund returns in line with expectations.

  • Downside protection

    Usually the more the returns fall, larger is the increase required in returns to recover portfolio losses. Apart from delivering higher risk-adjusted returns, the fund provides downside protection as well. The objective, in this, is to reduce the frequency and magnitude of capital losses which might result from significant market downturns.

  • Active fund management

    The fund manager adds value to portfolio through active management within the asset class. Research based investing with fundamental approach contributes to alpha generation in overall portfolio.

6. How to Invest in Mutual Funds?

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