Leveraging the benefit of diversification with Axis Equity Hybrid Fund

Ideal for investors who wish to gain exposure to investing in Equities but have a moderate risk appetite, the Axis Equity Hybrid Fund leverages a combination of two distinct asset classes (Equity and Debt) to offer a distinctive edge to the investors.
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Driven by weak global sentiment, the Equity markets continued to remain under pressure as volatility remained elevated amid FPI selling. In such times, prudent asset allocation comes to the aid of the investors. Despite the rollercoaster ride witnessed by the domestic markets, the resilience showcased by investors is noteworthy. However, creating a diversified yet balanced portfolio while attempting to navigate economic headwinds could pose an arduous challenge.

Thankfully, investors can opt for Hybrid Funds that allow them the benefit of investing in two or more asset classes under a unified scheme. The equity and debt exposure in a single scheme allows a layer of cushion to the investors’ portfolio. Amongst Hybrid Funds, the Aggressive Hybrid category has started seeing an uptick in interest amongst investors as a potential solution to weather market upheavals while ensuring downside protection.

To better understand this investment category and why it is emerging as a popular choice today, we spoke to Ashish Naik, Equity Fund Manager, Axis Mutual Fund. Here are the key takeaways from the conversation.

Understanding the importance of Asset Allocation

When it comes to determining their asset allocation mix, today investors have a plethora of investment options to choose from. Basis their investment corpus, risk appetite, time horizon, they can opt to invest in Equity, Debt, Gold, ETFs, Real Estate, Commodities, Direct equity etc.

Speaking about how proper asset allocation helps in diversifying investments and risk across different asset classes, Ashish said, With the asset allocation, the aim is to take advantage of all the market cycles and not let the portfolio get exposed to a single asset class.

Since history has demonstrated that various asset classes have minimal correlation between them, the ability of a portfolio to compound over the long term is not impacted significantly, even in the face of economic headwinds, he added.

What makes the Aggressive Hybrid category important?

With individual asset classes behaving differently during various times in a cycle, Ashish spoke about how Hybrid Funds are equipped as an all-weather long-term investing solution. They usually have lower downside risk and are relatively less volatile due to the core benefit of diversification; thereby reducing overexposure to a particular asset class.

The Aggressive Hybrid Fund allocates at least 65 percent in equity or equity oriented instruments, offering investors the benefit of equity taxation. The balance is invested into fixed income instruments. Aggressive Hybrid Funds follow a unique proposition of diversification. They provide investors the ease of investing by eliminating the need to invest in numerous funds to gain exposure to different asset classes, he said.

A mix of asset classes, which typically have a low correlation with each other can potentially be a good way to generate returns while navigating volatility, he added.

A Quality-Focused Portfolio

Given the investor anxiety around current volatility, Ashish also spoke about how the Axis Equity Hybrid Fund is a meticulously constructed portfolio of Quality-focused Equity & Fixed Income securities.

On the equity side, we are running a large cap oriented portfolio and the current exposure to large caps is somewhere between 80 to 85 percent. Even the mid-caps that we hold, are very selective in nature. We want to identify steady compounders, which are more established and have a proven track record. And the debt portfolio is actively managed as well,he said.

Explaining their debt Investment approach and how the fund focussed on Investing in best ideas, he said, We retain our barbell strategy consisting of a mix of high quality bonds, and low duration assets, including credit as a play on the carry theme.

The investor profile

It is easy for investors to get swayed by the market noise. Most often, investors tend to react to everyday market movements where emotional bias and market exuberance can lead to irrational investment decisions. Ashish explained that, The Axis Equity Hybrid Fund is targeted to those investors who want to gain exposure to Equity but have a moderate risk appetite. In such cases, the debt cushion has the potential to inject stability and (at times) offset risk to the investor’s portfolio while equities can be leveraged for capital appreciation.

Within the hybrid space, this is the fund which can be looked at as a precursor to pure equity investing, he added.


Source: Axis MF Research

Product Labelling & Riskometer:

Note: Market caps are defined as per SEBI regulations as below: a. Large Cap: 1st -100th company in terms of full market capitalization. b. Mid Cap: 101st -250th company in terms of full market capitalization. c. Small Cap: 251st company onwards in terms of full market capitalization.

Note: The views expressed by the fund manager are individual in nature and meant purely to information sharing. The sector(s)/stock(s)/issuer(s) mentioned in this presentation are for the purpose of illustration only and should not be construed as any research report/recommendation to buy / sell / hold. The Fund manager may or may not choose to have any future position in these sector(s)/stock(s)/issuer(s). Investors are requested to consult their financial, tax and other advisors before taking any investment decision(s).

Disclaimer: This press release represents the views of Axis Asset Management Co. Ltd. and must not be taken as the basis for an investment decision. Neither Axis Mutual Fund, Axis Mutual Fund Trustee Limited nor Axis Asset Management Company Limited, its Directors or associates shall be liable for any damages including lost revenue or lost profits that may arise from the use of the information contained herein. Investors are requested to consult their financial, tax and other advisors before taking any investment decision(s). Statutory Details: Axis Mutual Fund has been established as a Trust under the Indian Trusts Act, 1882, sponsored by Axis Bank Ltd. (liability restricted to Rs. 1 Lakh). Trustee: Axis Mutual Fund Trustee Ltd. Investment Manager: Axis Asset Management Co. Ltd. (the AMC). Risk Factors: Axis Bank Limited is not liable or responsible for any loss or shortfall resulting from the operation of the scheme. No representation or warranty is made as to the accuracy, completeness or fairness of the information and opinions contained herein. The AMC reserves the right to make modifications and alterations to this statement as may be required from time to time.

The information set out above is included for general information purposes only and does not constitute legal or tax advice. In view of the individual nature of the tax consequences, each investor is advised to consult his or her own tax consultant with respect to specific tax implications arising out of their participation in the Scheme. Income Tax benefits to the mutual fund & to the unit holder is in accordance with the prevailing tax laws as certified by the mutual funds consultant. Any action taken by you on the basis of the information contained herein is your responsibility alone. Axis Mutual Fund will not be liable in any manner for the consequences of such action taken by you. The information contained herein is not intended as an offer or solicitation for the purchase and sales of any schemes of Axis Mutual Fund.

Past performance may or may not be sustained in the future.

Stock(s) / Issuer(s)/ Sectors mentioned above are for illustration purpose and should not be construed as recommendation.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

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