SBI Hybrid Mutual Funds', offer 8 different types of mutual fund schemes under the hybrid mutual fund category. The total AUM belonging to these hybrid funds as on April 2024 is Rs 910,348 crores. The SBI hybrid schemes include balanced funds, multi-asset allocation funds, balanced advantage funds, equity savings funds, and arbitrage funds.
SBI Hybrid Funds are balanced funds that invest in stocks of companies for exposure to equities. Simultaneously, SBI Hybrid Mutual Funds invests in fixed income instruments or debt instruments to balance the risk of the portfolio.
SBI Hybrid Fund schemes have historically delivered higher returns in comparison to debt mutual funds.
Investors who seek diversification in their overall portfolio must invest in SBI Hybrid MF schemes.
Owing to the exposure to debt instruments, SBI Hybrid Mutual Funds are suitable for conservative investors who wish to have a balance of risk and returns.
SBI Hybrid Funds are suitable for investors with a medium to the long-term investment horizon.
Things To Consider Before Investing in SBI Hybrid Mutual Funds
Investment Objective: The investment objective of SBI Hybrid Mutual Funds is to deliver long term capital appreciation as well as liquidity to its investors. Owing to its investment goals, the schemes invest in a diversified portfolio comprising equity and equity related securities along with debt instruments. SBI Hybrid Mutual Funds are open ended schemes that aim towards a balance of risk and diversification of investment portfolio.
Investment Strategy: The investment strategy of SBI MF Hybrid schemes is to generate long term wealth creation from a mixed portfolio comprising majorly equity and equity related instruments. The asset allocation between equity and debt is guided by the type of scheme under the hybrid category such as arbitrage, asset allocation, equity savings fund and so on.
Associated Risk: Owing to the minimum exposure of 65% to equity and equity related instruments, SBI Hybrid Mutual Funds carries an associated risk to the equity market. SBI Hybrid Mutual Funds are exposed to investment risk, loss of principal risk, settlement risk, interest rate risk, and default risk. To mitigate such risks, the fund managers of SBI Hybrid Mutual Funds construct a portfolio according to the guidelines. These guidelines under the Regulations help mitigate these risks. However, due to the combination of equity and debt, SBI Hybrid Mutual Funds carry relatively lower risk than equity oriented funds. Moreover, this combination of equity and debt provides a balance of risk and reward to its investors.
Tax on SBI Hybrid Funds
The tax on SBI MF Hybrid funds depends on the percentage of exposure of the scheme towards equity and debt. If the scheme is exposed to equities of more than 65% then the tax treatment is similar to that of an equity fund. Otherwise, the tax treatment will be similar to that of debt funds.
Hence, if equity focused schemes are redeemed after 12 months then LTCG will be applicable. LTCG will be taxable at a flat rate of 10%. Moreover, LTCG of up to Rs 1 lakh is tax exempt. If equity focused schemes are redeemed within 12 months then STCG is applicable. STCG is taxable at a tax rate of 15%.
Furthermore, if debt focused schemes are redeemed after 36 months then LTCG arises. LTCG is taxable at a rate of 20% after giving the benefit of taxation. STCG will arise if these schemes are redeemed within 36 months. STCG is taxable at the applicable slab rate for the financial year.
As per the Finance Bill 2023, debt mutual funds will no longer have the LTCG benefit. Thus, capital gains arising for debt investments after April 1st 2023, will be taxed as per the investor’s IT slab rate.
