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Mirae Asset Hybrid Equity Fund completes 5 years, tops return charts

Mirae Asset Hybrid Equity Fund recently completed five years. Launched in July 2015, Mirae Asset Hybrid Equity Fund has given 10.16% returns in the five-year period, 6.45% in three years and 7.29% in one year. The scheme has given 10.37% returns since inception and manages assets worth Rs 3,468 crore.

1-year returns (%) 3-year returns (%) 5-year returns (%)
Mirae Asset Hybrid Equity Fund 7.13 6.69 10.28
Aggressive hybrid category average 5.24 3.06 6.39

As on July 31, the fund has 71.7% allocation to equity, 23% to debt and 5.3% cash. The scheme is primarily large-cap oriented with Reliance Industries, HDFC Bank, ICICI Bank and Infosys being the top stocks. The portfolio has 57 stocks, with top 10 holdings accounting for 41%.

Stocks Allocation (%)
Reliance Industries 6.68
HDFC Bank 6.51
ICICI Bank 4.14
Infosys 3.36
Axis Bank 2.87
Tata Consultancy Services 2.82
Larsen & Toubro 2.81
ITC 2.70
State Bank of India 2.63
NTPC 1.87

On the debt side, the maximum allocation is towards government bonds, followed by A1+ papers. Table below shows the details of its debt asset allocation:

Company Credit Quality Allocation (%)
6.45% GOI 2029 SOV 6.18
5.79% GOI 2030 SOV 3.29
HDFC Securities 169-D 15/07/2020 A1+ 2.88
Reliance Jio Infocomm 91-D 05/08/2020 A1+ 2.16
6.19% GOI 16/09/2034 SOV 2.01

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Mirae Asset Hybrid Equity Fund has an envious track record in five years of its existence. The scheme has offered good five- year rolling returns and good downside protection. That means it has given decent risk-adjusted returns over the years.

The scheme is large-cap oriented and that gives it an extra safety edge. The fund managers- Harshad Borawake and Vrijesh Kasera – have followed a bottom up stock picking approach and have constructed a portfolio of quality growth companies with high ROIC, which has helped maintain its track record.

In the fixed income space, they are invested in high quality debt instruments and active duration management that has led to the debt portion of the scheme also performing well. The impressive part is that 56.62% of the times, the fund delivered more than 10% over a 1-year rolling period since the inception.

Surana managed the scheme before the new managers took charge in April 2020.

The process is based on a team-based approach. The fund inducted Harshad Borawake and Vrijesh Kasera as lead managers in April 2020. The fund managers generally invest about 72% in equities, and the remaining in fixed income. The investments in equities will be predominantly in large cap companies.

We would like to outline the two key aspects of investment philosophy:

Stock selection: Our investment philosophy is centered around participating in quality businesses, but up to a reasonable valuation. Analysis of all three buckets – Business, Management, and Valuation – is important from a risk-reward matrix and outliers are avoided. These outliers include a sub-par quality of business or management, and at the other extreme great businesses but with an expensive price tag.

Portfolio construction: Discipline, and adequate diversification is important. We seek to construct a diversified portfolio, which could handle mistakes and deliver decent risk-adjusted returns.

The debt strategy is largely divided in two parts. The core part is managed on a relatively static basis and is typically invested in government securities and corporate bonds. For the second part, which is more tactical, a more active strategy is adopted with appropriate changes in duration in line with the outlook on interest rates. Thus, the aggregate strategy is provided in a balanced and consistent manner, benefit of both a directional return in line with the underlying market environment as well as that of an active management strategy.


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