Last Updated on Apr 22, 2025 by Aishika Banerjee
The term ‘mutual funds’ is pretty popular, but did you know there are several types of mutual funds? One of them is hybrid funds which invest in both debt and equity. The portfolio of a hybrid fund would consist of equity, debt, bonds, money market instruments, and the like. In this article, let’s explore the top 10 hybrid mutual funds, their features, types, benefits, taxation and more.
Table of Contents
List of Top 10 Hybrid Mutual Funds
Here’s a list of the best hybrid mutual funds in India in 2025.
| Name of the fund | Sub Category | AUM (Rs. in cr.) | CAGR 3Y (%) | CAGR 5Y (%) |
| Quant Multi Asset Fund | Multi Asset Allocation Fund | 3,182.56 | 17.89 | 32.99 |
| JM Aggressive Hybrid Fund | Aggressive Hybrid Fund | 767.72 | 22.07 | 29.82 |
| Quant Absolute Fund | Aggressive Hybrid Fund | 2,000.44 | 12.97 | 29.12 |
| Bank of India Mid & Small Cap Equity & Debt Fund | Aggressive Hybrid Fund | 1,067.62 | 16.23 | 28.12 |
| ICICI Pru Equity & Debt Fund | Aggressive Hybrid Fund | 40,961.70 | 18.73 | 28.00 |
| HDFC Balanced Advantage Fund | Balanced Advantage Fund | 94,824.34 | 19.81 | 26.82 |
| ICICI Pru Multi-Asset Fund | Multi Asset Allocation Fund | 55,360.32 | 18.58 | 26.06 |
| Mahindra Manulife Aggressive Hybrid Fund | Aggressive Hybrid Fund | 1,566.53 | 17.58 | 24.93 |
| Edelweiss Aggressive Hybrid Fund | Aggressive Hybrid Fund | 2,487.15 | 18.26 | 24.45 |
| UTI Aggressive Hybrid Fund | Aggressive Hybrid Fund | 5,910.13 | 17.18 | 24.36 |
Note: The top hybrid mutual funds listed here are as of 22nd April 2025 and derived using Tickertape Mutual Fund Screener. The parameters used to generate these are as follows:
- Category: Hybrid
- CAGR 3Y
- CAGR 5Y – Sorted from high to low
Overview of the Top Hybrid Funds
Quant Multi Asset Fund
Quant Multi Asset Fund is a diversified investment scheme by Quant Mutual Fund. It invests across equity, debt, and commodity markets, aiming to optimize returns while minimizing risk. The fund follows a dynamic asset allocation strategy, targeting consistent performance across varying market conditions.
JM Aggressive Hybrid Fund
JM Aggressive Hybrid Fund, managed by JM Financial Mutual Fund, blends equity and debt investments. With a major portion in equities and the rest in debt instruments, it aims for capital appreciation with moderate risk. It suits investors seeking a balance between growth and stability.
Quant Absolute Fund
Quant Absolute Fund is an equity-oriented hybrid scheme by Quant Mutual Fund. It seeks long-term capital appreciation with capital preservation, investing in equity and equity-related instruments along with fixed-income securities. Its strategy emphasizes risk-adjusted returns and dynamic asset reallocation.
Bank of India Mid & Small Cap Equity & Debt Fund
This fund by Bank of India Mutual Fund invests primarily in mid and small-cap equities, complemented by debt instruments. It targets growth potential in emerging companies while ensuring stability through debt exposure, suitable for investors with a moderately high-risk appetite.
ICICI Pru Equity & Debt Fund
ICICI Prudential Equity & Debt Fund is a balanced hybrid fund investing in equities and fixed-income securities. Managed by ICICI Prudential Mutual Fund, it aims for long-term capital growth and income generation. Investors seeking a mix of market growth and stability can consider this fund.
HDFC Balanced Advantage Fund
HDFC Balanced Advantage Fund dynamically manages equity and debt allocation based on market valuations. Offered by HDFC Mutual Fund, it aims to provide capital appreciation and income over the long term. Investors looking for a balanced exposure to market volatility can consider this fund.
ICICI Pru Multi-Asset Fund
ICICI Pru Multi-Asset Fund is a diversified hybrid scheme investing across equity, debt, and other asset classes like gold. It seeks long-term wealth creation with reduced volatility. Managed by ICICI Prudential, it offers an all-weather portfolio suitable for varied market conditions.
Mahindra Manulife Aggressive Hybrid Fund
This fund from Mahindra Manulife Mutual Fund combines a high allocation to equities with a smaller portion in debt. It targets capital appreciation and some income, appealing to investors with a higher risk tolerance and a medium to long-term investment horizon.
Edelweiss Aggressive Hybrid Fund
Managed by Edelweiss Mutual Fund, this hybrid scheme invests predominantly in equities with a balance in fixed-income instruments. It aims to deliver long-term capital appreciation and income, ideal for investors seeking equity growth with a cushion of debt stability.
UTI Aggressive Hybrid Fund
UTI Aggressive Hybrid Fund, from UTI Mutual Fund, allocates primarily to equities and partially to debt. Designed for long-term wealth creation, it balances risk and return, catering to investors looking for growth with lower volatility compared to pure equity funds.
What are Hybrid Funds?
Hybrid funds are a type of mutual fund that is typically a combination of equity and debt investments. In essence, a hybrid fund invests in two or more asset classes and diversifies across a mix of bonds, stocks, commodities and other securities. These funds are great for investors who want a carefully crafted portfolio having exposure to both debt and equity.
With hybrid funds, you, as an investor, can avoid the risk of concentration in the portfolio and achieve a calculated blend of both debt and equity that offer higher returns alongside some level of capital protection than what a single debt or equity fund offers.
Features of Hybrid Mutual Funds
- Hybrid funds invest in a combination of debt and equity instruments.
- These funds are known for better risk management.
- The funds offer diversification at the investor’s discretion.
- Hybrid funds can be debt or equity-based.
- A fund manager will manage your investments, percentage of exposure, buying, and selling.
- There are largely seven different types of hybrid funds.
- Equity-oriented hybrid funds held for more than a year will attract a 10% LTCG (Long-Term Capital Gains) tax. If the fund is held for less than a year, a 15% STCG (Short-Term Capital Gains) tax will be applicable.
- Debt-oriented mutual fund gains are taxed as per the income slab.
How do Hybrid Mutual Funds Work?
Also known as asset allocation funds, hybrid funds allow investors to invest in multiple asset classes via a single fund. They have varying levels of risk associated with them, which helps investors determine what the right mix for them is. The fund manager of a hybrid fund will allocate your money in predetermined ratios in equity and debt instruments.
The percentage mix of debt to equity in hybrid funds depends on your choice, risk profile, and financial goal. These funds give you the best of both worlds and help you achieve your financial goal with the right amount of risk. A combination of both these can also offset the negative repercussions of a crisis in the debt or equity market.
The equity portion of your investment will give you gains in the long run, while the debt portion of your investment will give you regular income via its interest-generating mechanism.
Types of Hybrid Mutual Funds
The types of hybrid funds are determined on the basis of the quantum of exposure the fund has to the chosen underlying assets. The most popular types of hybrid funds are:
1. Equity-oriented hybrid funds
These hybrid equity funds invest at least 65% of the money in equity instruments and the rest in the debt and money market.
2. Debt-oriented hybrid funds
These hybrid debt funds invest at least 60% of their assets in debt instruments like bonds, debentures, and government securities.
3. Balanced hybrid funds
This fund balances the equity and debt portion of your investment and invests a minimum of 40% and a maximum of 60% in either of the asset classes. A benefit of investing in a balanced fund is that it uses equity and debt components to leverage current market scenarios to generate wealth in the long term.
4. Arbitrage funds
These funds buy stocks at a lower price in a particular market and sell them at a higher price in another market. The majority of the investment in these funds is made in equity instruments. When arbitrage opportunities are unavailable, these funds invest in debt securities and cash markets, making the investment relatively sound and safe.
5. Multi-asset allocation fund
The best way to invest is not to put all your eggs in one basket. Multi-asset allocation funds do exactly this. Invest in multiple asset classes like gold, equity, debt, and others.
Benefits of Hybrid Mutual Funds
Hybrid mutual funds, including equity and debt hybrid funds, offer dual benefits of debt and equity to investors and help diversify the portfolio. Diversification may increase when the fund manager allocates the portfolio in the equity portions across small, mid, and large-cap segments. Hybrid funds are one of the most convenient forms of investment and help lower the risk involved when seeking equity exposure.
With hybrid funds, investors with varying risk tolerances can choose how they want to allocate their investments. There is a range of hybrid funds one can choose from. They offer higher returns than debt funds and have been shown to perform at par with equity funds as well.
The expense ratio of a hybrid fund is also lower than that of isolated equity funds. Not to mention, hybrid funds allow investment via the SIP method, which is the most suitable method for the salaried class.
Nevertheless, the biggest advantage is the ability of equity-debt hybrid funds to balance risk and return. They are great for meeting short-term financial goals and investing for the long term as well.
Who Should Invest in a Hybrid Fund?
Hybrid fund investments are a fantastic choice for new investors who don’t want to take a lot of risk at the beginning of their investment paths. First-time investors get adequate exposure to equity funds with minimal risk since they are much safer than equity funds.
Less conservative investors can also opt for hybrid funds for long-term to take just the right amount of risk and also have a cushion against market fluctuations. Budding investors can start their investment journey with hybrid funds to avoid high-risk investment instruments they might not know about.
What to Consider Before Investing in Hybrid Funds?
1. Risk-return assessment
Based on the type of hybrid fund you opt for, understand the risk associated with it. An equity-oriented hybrid fund will be riskier than a balanced fund or a debt-oriented fund. Remember, no investment in the equity market is risk-free, not even the best hybrid mutual funds India. This is why it is better to exercise caution and choose the proportion of equity and debt funds in a disciplined manner.
2. Investment horizon
Understand your goals and pick a hybrid fund that matches them. For instance, you may want to invest in balanced funds with a dividend option for your retirement.
3. Cost
Like all other funds, hybrid funds with high returns also charge a fee to manage your portfolio. When opting for a hybrid fund, one must look for a low expense ratio.
4. Investment strategy
While hybrid funds allow investment in multiple asset classes, there must be a sound strategy for choosing these. Fund managers must carefully select a combination of assets without the investors’ influence.
Taxation on Hybrid Mutual Funds
Understanding the latest tax regulations on high-return hybrid funds is crucial for managing your investments efficiently. The Union Budget 2024 has introduced several changes impacting the taxation of hybrid mutual funds. Here’s a detailed breakdown of the new tax rules:
Short-Term Capital Gains (STCG)
For hybrid mutual fund schemes, the tax treatment of short-term capital gains depends on the asset allocation of the fund:
- Equity-Oriented Hybrid Funds (more than 65% in equity): If you sell units within one year, the gains are considered short-term and taxed at 20%.
- Debt-Oriented Hybrid Funds (less than 65% in equity): If you sell units within three years, the gains are considered short-term and taxed according to your income tax slab.
Long-Term Capital Gains (LTCG)
For high and low-risk hybrid funds held beyond the specified holding periods, the tax treatment is as follows:
- Equity-Oriented Hybrid Funds (more than 65% in equity): Gains from units held for more than one year are considered long-term. These gains are taxed at a flat rate of 12.5%, with gains up to Rs. 1.25 lakh being tax-free.
- Debt-Oriented Hybrid Funds (less than 65% in equity): Gains from units held for more than three years are considered long-term and are now taxed at a flat rate of 12.5% without indexation benefits. This change means that the entire gain is taxable at this rate without adjusting for inflation.
Summary
| Type of Fund | Short-Term Capital Gains (STCG) | Long-Term Capital Gains (LTCG) | Indexation Benefit |
| Equity-Oriented Hybrid Funds | 20% for holdings less than 1 year | 12.5% for holdings over 1 year, with gains up to Rs. 1.25 lakh tax-free | Not available |
| Debt-Oriented Hybrid Funds | Taxed as per income tax slab for holdings less than 3 years | 12.5% for holdings over 3 years | Not available |
Conclusion
Hybrid funds are those that invest in both – debt and equity. Hybrid funds are an excellent option for investors looking for high returns and stable risk management. The percentage of exposure is in mind with the investor’s risk appetite and investment goals. These funds bring the best of both worlds to investors and can help create long-term wealth.
Before investing, do not forget to visit Tickertape’s Mutual Fund Screener. With over 50 filters, you can compare, study and research the fund of your choice, all in just a few clicks! Tickertape makes your investment journey easy and meaningful! Visit now!
Frequently Asked Questions About Hybrid Funds
1. What are hybrid mutual funds?
Hybrid mutual funds are a type of mutual fund that invests in both debt and equity. The portfolio of a hybrid fund would consist of equity, debt, bonds, money market instruments, and the like.
2. Which is the best hybrid mutual fund?
The best hybrid fund options according to the 5-yr CAGR are,
– Quant Multi Asset Fund
– JM Aggressive Hybrid Fund
– Quant Absolute Fund
The best performing hybrid mutual funds listed here are as of 22nd April 2025. These are derived using Tickertape Mutual Fund Screener. You can use the Mutual Fund Screener to filter the best hybrid mutual fund according to your preferred parameters.
As an insatiable reader and learner, I’ve spent the last two years exploring the world of finance. With my creative mind and curious spirit, I love making complex finance topics easy and fun for everyone to understand. Join me on my journey as we navigate the world of finance together!
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