Hybrid mutual fund inflows jump over 40% in May

Hybrid mutual funds continued to attract strong investor interest in May, following a sharp rebound in April. The category saw net inflows of ₹20,765 crore in May, a 46% increase over April’s ₹14,247 crore, according to data from the Association of Mutual Funds in India (AMFI).

The turnaround began in April, when hybrid funds reversed a net outflow of ₹946 crore seen in March.

Among hybrid categories, arbitrage funds recorded the highest inflows in May at ₹15,701 crore, up 33% from the previous month. Multi-asset allocation funds collected ₹2,926 crore, a 39% rise from April.

Analysts link this trend to ongoing market volatility and investor preference for diversified products. Factors such as global geopolitical tensions, including the Russia-Ukraine conflict, and uncertainty over US trade policies have increased caution among investors.

Hybrid funds invest in a mix of asset classes, including equity, debt, and commodities like gold. This diversification helps reduce portfolio risk while allowing for potential returns.

Some hybrid funds have posted strong medium-term performance. Nippon India’s Balanced Advantage Fund returned 13.55% over the past three years, while its Multi Asset Allocation Fund delivered 17.99%. The latter also includes exposure to gold and silver.

Schemes from Kotak Mutual Fund, ICICI Prudential, and SBI Mutual Fund have also shown double-digit returns in the same period. The recent rise in gold prices has contributed to the performance of funds with commodity exposure.

Fund managers use a dynamic approach to shift allocations between equity and debt, depending on market valuations. Experts believe this helps limit downside risks and makes hybrid funds attractive during uncertain times.