Investors looking for decent returns without taking on heavy risk now have a new option to consider. ICICI Prudential Asset Management Company has launched its new Balanced Hybrid Fund. The scheme's New Fund Offer, or NFO, opened on June 30 and will close on July 14, giving interested investors only a short window to get in at the initial offer price.
How the scheme is structured
This is an open-ended balanced scheme that will invest only in equity and debt instruments. There is no room for arbitrage strategies in this fund. According to the fund house, the scheme's entire purpose is to deliver capital appreciation along with regular income to investors through an active investment strategy.
The strategy behind equity and debt investments
On the equity side, the fund managers will invest across different market capitalisations and sectors. On the debt side, investment opportunities will be chosen based on duration, AAA rated papers, government securities and credit quality. The portfolio will be reviewed from time to time based on prevailing market valuations and conditions. How much money goes into equity versus debt will depend on indicators such as corporate earnings and bond yields.
What the CIO had to say about the strategy
Shankaran Naren, Executive Director and Chief Investment Officer at ICICI Prudential Asset Management Company, said the Balanced Hybrid Fund has been designed specifically to strike the right balance between equity and debt allocation. Based on current market conditions, between 40 and 60 percent of the portfolio will be allocated to each of equity and debt. Naren said this balanced approach should work well in the current environment while also helping investors generate income and build wealth over the long term.
Why mixing both asset classes helps
Equity has historically created substantial wealth for investors over long periods, though it comes with volatility and periodic declines. Debt based investments, on the other hand, tend to deliver more stable returns over time and are generally seen as more dependable than equity. Since equity and debt typically do not move in the same direction at the same time, combining the two in a single portfolio can improve the overall investment experience. Historical data shows that mixed equity and debt portfolios have shown smaller losses during equity downturns while also delivering better returns than a pure debt portfolio during normal market conditions.
Minimum investment amount
Investors can enter this scheme with a minimum of Rs 500. After that, additional investments can be made in multiples of Re 1. The ICICI Prudential Balanced Hybrid Fund will be available in two plans, Direct and Regular. The scheme's benchmark is the CRISIL Hybrid 50+50 Moderate Index.
How this differs from other SEBI hybrid categories
Under this scheme's structure, both equity and debt receive an allocation of 40 to 60 percent each, with no separate allocation set aside for arbitrage. This is what sets SEBI's Balanced Hybrid category apart from the other two hybrid categories. The Aggressive Hybrid category requires 65 to 80 percent in equity and 20 to 35 percent in debt, while the Conservative Hybrid category requires 10 to 25 percent in equity and 75 to 90 percent in debt. The Balanced Hybrid Fund, in effect, offers a middle path between these two categories.
