Definition of Hybrid Fund
A hybrid fund is a mutual fund that invests in a combination of equity and debt instruments — providing both growth potential and stability in a single scheme. The allocation between equity and debt varies based on the fund's category and mandate.
SEBI categorizes hybrid funds into: Aggressive Hybrid (65–80% equity), Conservative Hybrid (10–25% equity), Balanced Hybrid (40–60% equity), Dynamic Asset Allocation/Balanced Advantage funds (equity allocation changes dynamically), Multi Asset Allocation (at least 3 asset classes), Arbitrage funds, and Equity Savings funds.
Hybrid funds are suitable for moderate-risk investors who want equity exposure without the full volatility of pure equity funds. Balanced Advantage funds (BAF) are particularly popular as they automatically shift between equity and debt based on market valuations, reducing the need for manual rebalancing.