Ppfas conservative hybrid fund details

Ppfas conservative hybrid fund is a NFO from the house of Parag Parikh mutual fund.

The fund would be a hybrid fund on the conservative side investing primarily in debt securities with a very minimal exposure to equities.

NFO details for Ppfas Conservative Hybrid Fund

Scheme Opens	07/05/2021
Scheme Closes	21/05/2021
Fund Manager	Mr. Rajeev Thakkar Mr. Raunak Onkar Mr. Raj Mehta
Benchmark	CRISIL Hybrid 85 – Conservative Index TRI
Fund Category	Conservative Hybrid
Exit Load	No exit load if 10% of units is redeemed In excess of that, 1% if redeemed or switched within a year No exit load if redeemed after a year

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Ppfas Conservative Hybrid Fund Investment Objectives

The investment objective of this conservative hybrid fund is to generate regular income by investing predominantly in debt and money market instruments.

The scheme also seeks to generate long term capital appreciation from equity portion of the scheme.

There is no guarantee that the investment objective of the fund would be realized.

Ppfas Conservative Hybrid Fund Allocation

The asset allocation for the fund would be something like this

Asset Class	Minimum %	Maximum %
Debt securities (including securitized debt) & Money market instruments	75	90
Equity and Equity Related instruments	10	25
Units issues by REITS and InvITs	0	10

The above figures are only indicative and not fixed, the fund managers have the liberty to move across the asset classes depending upon prevailing market conditions as long as they remain within the mandate permitted.

The fund can also invest in REITs and InvITs if so desired.

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Features of Ppfas Conservative Hybrid Fund

REITs & InvITs

This option allows the fund to try to beat inflation via annual increments.

It opens the possibility of growth in investment value due to increase in Net Asset Value (NAV).

Equities

The preference would be for stocks with strong cash flows and higher dividend payout.

Focus will also be on stocks with a high margin of safety.

This stands true for stocks with strong fundamentals too but are currently out of favour.

It would not be far fetched to assume based on the above points that the equity portion of this fund would function on similar lines to the Parag Parikh Flexi cap fund.

Fixed Income Investments

The fund can invest in both, accrual and duration related instruments.

These include sovereign, state government, PSU and corporate securities.

Ppfas Conservative Hybrid Fund Options

Pfas Conservative Hybrid mutual fund provides investors with the following two options

Growth: This option is most suited for investors who are not seeking dividends or who are not dependent on mutual fund dividends as a source of monthly income and would rather see their capital appreciate.

Income Distribution cum capital withdrawal :This option is most suited for investors who are seeking dividends or who are dependent on mutual fund dividends as a source of monthly income and are not looking for capital appreciation.

In case you do not opt for a particular option between growth and income distribution cum capital withdrawal option then the default option would be growth.

What is a conservative hybrid fund?

A conservative hybrid fund as the name suggests is a hybrid fund but on the conservative side.

It invests predominantly in debt securities with a minimum exposure to equities.

A conservative hybrid fund by regulation requires 75 – 90% of its total assets invested in debt or fixed income securities.

The remaining 10 – 25% has to be allocated to equities.

Hybrid funds that invest mostly in equities are called equity oriented funds and those that invest majorly in debt are called debt oriented funds.

Taxation on conservative hybrid fund

A conservative hybrid fund because of the mandate to invest majorly in debt is a debt oriented fund and therefore for tax purposes is also treated as a debt fund.

LTCG

Long term capital gains tax is applied on gains from a conservative hybrid funds held for more than 36 months.

The LTCG rate for a conservative hybrid fund is 20% after indexation.

STCG

Short term capital gains tax is applied on gains from a conservative hybrid fund held for less than 36 months.

Short term capital gains are added to your income and taxed as per your income tax slab.

How do conservative hybrid funds work?

A conservative hybrid fund is less volatile than an equity fund since the major investments are in debt.

They are however not risk free.

They still have to invest a certain portion in equity which can be volatile.

The debt portion is also prone to credit and interest rate risk.

Advantages of a conservative hybrid fund

A conservative hybrid fund can be considered for a short time duration unlike equity mutual funds, that is 3 years or less.

Since a conservative hybrid fund invests mostly in debt securities, it is stable.

This does not negate risk though, it still carries credit and interest rate risk.

The fund can provide meaningful diversification to a portfolio.

It holds the potential for capital appreciation via their exposure to limited equity instruments.

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Disclaimer : While due precaution has been undertaken in the preparation of this article, The Mutual Fund Guide or any of its authors will not be held liable for any investments based on the above article. The above article should not be considered financial advice and has been published only for your perusal. Due credit has been given in case wherever required, in case you feel any part violates any rights then do get in touch with us and we shall get it duly removed.

Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing