Indian equity markets have remained volatile over the past 15-18 months, offering little directional clarity for investors. For those with a moderate risk appetite and concerns around this volatility, balanced mutual fund categories can offer a more measured approach. Aggressive hybrid funds, in particular, al-locate 65 to 80 per cent to equities, with the remainder in debt instruments, allowing investors to participate in market up-swings while cushioning down-side during corrections.
Kotak Aggressive Hybrid Fund (KAHF) stands out as a consistently better-performing fund in this category. With a track record of over 27 years, it has delivered a compounded annual growth rate (CAGR) of 14 per cent since inception.
EQUITY-HEAVY
At the portfolio construction level, the fund maintains a relatively high equity allocation. Over the past three years, equity exposure has ranged between 69 and 80 per cent, and currently stands close to the upper end of that band.
On the equity side, stock se-lection is anchored in a few core principles. The fund priorities strong cash-generating, businesses that can fund growth internally rather than relying on excessive debt or equity dilution. Return on capital is expected to exceed the cost of capital, typically above 12-15 per cent in most cases. It also evaluates distribution discipline in capital allocation and avoids companies diversifying into unrelated businesses. Alongside these factors, the focus remains on companies with visible and sustainable earnings growth over the next three to four years.
Within equities, around 45 per cent is invested in large-cap companies, while 30-35 per cent is allocated to mid- and small-cap stocks. This mix has remained broadly consistent over time.
PERFORMANCE
The fund's performance has been notable. Five-year rolling returns, calculated over the past seven years, show a CAGR of 18 per cent compared with the category average of 16 per cent. During this period, returns ranged from 11.7 per cent to 25 per cent, with nearly 90 per cent of observations delivering re-turns above 15 per cent.
On costs, the regular plan's expense ratio stands at 1.73 per cent, below the peer average of 2 per cent, while the direct plan's expense ratio is 0.47 per cent, also lower than the category average of 0.8 per cent.
Overall, the fund is suited for investors with medium-term horizons of at least five years. Given the current volatile market conditions, a systematic in-vestment approach may be more appropriate.
Blog by Mr.Santosh G Akerkar for educational and knowledge purposes only.
Best Regards,
Santosh Akerkar
