Striking The Right Balance

Investors often struggle to decide where to put their money, especially when equity markets are volatile and debt instruments offer relatively attractive returns.

If you are also facing this dilemma because of the current market environment, aggressive hybrid funds offer a solution. These funds invest both in equity and debt to take advantage of both worlds. Equity provides higher growth and debt acts as a shock absorber in the portfolio.

The other advantage of investing in the aggressive hybrid fund category is its tax treatment. Despite having debt component in the portfolio, it enjoys pure equity fund taxation.

The Scheme

The SBI Aggressive Hybrid Fund (SAHF) follows a 75-25 equity-debt asset allocation strategy. Within equity allocation, it prefers investing 50 per cent in large-cap stocks for stability during volatile periods. The remaining 50 per cent of equity is allocated in mid- and small-cap stocks to boost returns. This strategy has worked for the fund in delivering consistent returns.

Considering the higher volatility in market, the fund is following a conservative approach by tilting equity portfolio towards large-cap stocks. As on September 30, 2026, the fund has deployed around 56.58 per cent of its equity portfolio in large-cap stocks, and minimised the small-cap exposure to 26.74 per cent. Typically, small-cap stocks are considered more volatile and their valuations are also stretched.

In terms of debt allocation, the fund invests 50 per cent of the debt corpus in high-yield papers with above AA rating. The remaining debt component is invested in government securities and other highly rated papers. Currently, it holds 12.75 per cent in non-convertible debentures, and the remaining in government bonds, certificates of deposits, and Treasury bills.

Performance

SAHF has consistently outperformed the benchmark in the last 1, 3, 5, and 10 years, and also outperformed BSE Sensex TRI index, despite being a hybrid fund.

OLM Take

Investors who want to participate in equity with a cushion of debt may consider investing in this fund.

kundan@outlookindia.com