Hybrid mutual funds received ₹23,223 crore in June 2025 alone. That's 163% higher than the same month last year.
Why the surge? NRIs discovered what we've been telling our Belong community for years: you don't have to choose between growth and safety. Hybrid funds give you both in a single investment.
At Belong, we speak with NRIs daily who are torn between fixed deposits that feel too safe and equity funds that feel too risky. Hybrid funds sit right in the middle. They combine equity's growth potential with debt's stability, automatically rebalancing so you don't have to.
This guide breaks down all seven hybrid fund categories. We rank funds within each category, explain which suits different risk profiles, and show you the tax implications for NRIs. By the end, you'll know exactly which type of hybrid fund matches your situation.
What Are Hybrid Mutual Funds?
Hybrid funds invest in multiple asset classes within a single portfolio. Most combine equity (stocks) and debt (bonds). Some add gold, real estate investment trusts (REITs), or commodities.
SEBI classifies hybrid funds into seven categories based on their asset allocation:
Category | Equity Allocation | Debt Allocation | Risk Level |
|---|---|---|---|
Conservative Hybrid | 10-25% | 75-90% | Low |
Balanced Hybrid | 40-60% | 40-60% | Moderate |
Aggressive Hybrid | 65-80% | 20-35% | Moderately High |
Dynamic Asset Allocation | 0-100% | 0-100% | Moderate |
Multi-Asset Allocation | Min 10% each in 3 classes | Varies | Moderate |
Arbitrage | 65%+ (hedged) | Rest in debt | Low |
Equity Savings | 65%+ (partially hedged) | Rest in debt | Low-Moderate |
Each category serves different investor needs. Let's explore them with the best funds in each.
Why NRIs Choose Hybrid Funds Over Pure Equity
Living in the UAE means you can't monitor Indian markets daily. Hybrid funds solve three problems:
Automatic rebalancing. Fund managers shift between equity and debt based on market conditions. You don't need to time your switches.
Reduced volatility. When equity markets crash, the debt portion cushions the fall. Your portfolio doesn't swing as wildly as pure equity funds.
Single-fund diversification. Instead of managing separate equity, debt, and gold investments, one hybrid fund covers multiple bases.
According to AMFI data, hybrid fund AUM crossed ₹8.5 lakh crore in 2025, reflecting growing investor preference for balanced approaches.
👉 Tip: If you're within 5-7 years of a major goal (retirement, child's education, property purchase), hybrid funds offer better risk management than pure equity.
Best Aggressive Hybrid Funds
Aggressive hybrid funds invest 65-80% in equity and 20-35% in debt. They're treated as equity funds for taxation, making them tax-efficient for NRIs.
Ranking Criteria: 5-year returns, risk-adjusted performance, and AUM stability.
Rank | Fund Name | 5Y CAGR | 3Y CAGR | AUM (₹ Cr) | Expense Ratio |
|---|---|---|---|---|---|
1 | ICICI Prudential Equity & Debt | 22.8% | 19.6% | 49,223 | 0.90% |
2 | Bank of India Mid & Small Cap E\&D | 21.1% | 18.2% | 1,321 | 0.80% |
3 | Quant Aggressive Hybrid | 20.4% | 12.4% | 2,110 | 0.80% |
4 | Edelweiss Aggressive Hybrid | 19.0% | 17.9% | 3,413 | 0.40% |
5 | JM Aggressive Hybrid | 18.7% | 19.4% | 1,850 | 0.85% |
6 | Kotak Aggressive Hybrid | 17.5% | 15.8% | 8,462 | 0.50% |
7 | SBI Equity Hybrid | 15.5% | 14.7% | 81,952 | 0.72% |
Data as of December 2025. Source: INDmoney, Value Research, Groww
ICICI Prudential Equity & Debt Fund: The Category Leader
The oldest and largest aggressive hybrid fund, managing ₹49,223 crore with a 22.8% five-year return.
Asset allocation: 73.5% equity, 19.2% debt, 5.1% in real estate and other assets. This diversification beyond traditional equity-debt mix adds another layer of protection.
Top holdings: TVS Motor (5.3%), ICICI Bank (4.1%), HDFC Bank (3.8%), and exposure across financial services, consumer cyclicals, and industrials.
What sets it apart: The fund maintains equity exposure at the higher end of the 65-80% range during bull markets and shifts toward debt during corrections. This dynamic approach has helped deliver consistent outperformance.
Fund Manager: Sankaran Naren, known for his contrarian investment style.
AUM: ₹49,223 crore Expense Ratio: 0.90% Minimum SIP: ₹100
SBI Equity Hybrid Fund: The Giant
India's largest aggressive hybrid fund by AUM at ₹81,952 crore. This reflects institutional trust built over decades.
Asset allocation: 68% equity, 25% debt. The fund maintains a conservative-aggressive balance, leaning toward large-cap stocks for the equity portion.
Returns: 15.5% over 5 years, 14.7% over 3 years. Lower than category leaders but with significantly lower volatility.
Why choose it: If you want aggressive hybrid exposure with the stability of India's largest fund house, SBI Equity Hybrid offers predictable performance. The massive AUM ensures liquidity and professional management.
Expense Ratio: 0.72% Minimum SIP: ₹500
Edelweiss Aggressive Hybrid Fund: The Cost Leader
The lowest expense ratio (0.40%) among aggressive hybrid funds, combined with strong 19% five-year returns.
Why it matters: On a ₹50 lakh investment over 10 years, the 0.50% expense difference from average funds saves approximately ₹8-10 lakh in fees.
Best for: Cost-conscious investors who want aggressive hybrid exposure without paying premium fees.
👉 Tip: Always choose Direct plans over Regular plans. The difference saves 0.5-1% annually, which compounds significantly over time.
Best Balanced Advantage Funds (Dynamic Asset Allocation)
Balanced advantage funds (BAFs) dynamically adjust equity exposure from 0-100% based on market valuations. They buy more equity when markets are cheap and reduce exposure when valuations stretch.
This is the most popular hybrid category, with funds like HDFC BAF crossing ₹1 lakh crore AUM.
Rank | Fund Name | 5Y CAGR | 3Y CAGR | AUM (₹ Cr) | Expense Ratio |
|---|---|---|---|---|---|
1 | HDFC Balanced Advantage | 23.0% | 19.1% | 1,06,494 | 0.73% |
2 | ICICI Prudential BAF | 13.9% | 14.1% | 68,450 | 0.87% |
3 | Edelweiss Balanced Advantage | 16.8% | 15.2% | 12,500 | 0.52% |
4 | Kotak Balanced Advantage | 14.5% | 13.8% | 18,200 | 0.62% |
5 | Nippon India Balanced Advantage | 15.2% | 14.5% | 9,800 | 0.78% |
Data as of December 2025. Source: Value Research, Tickertape
HDFC Balanced Advantage Fund: India's Largest Hybrid Fund
Managing over ₹1,06,494 crore, HDFC BAF is India's most trusted balanced advantage fund. Its 23% five-year return significantly outperforms the category average.
Current allocation: 60.6% equity, 28% debt, 11.4% others (including arbitrage positions and cash).
Top holdings: HDFC Bank, ICICI Bank, Axis Bank, Infosys, Reliance Industries. The fund maintains a large-cap bias in its equity portion.
PE Ratio: 19.19 versus category average 25.10. This lower PE indicates the fund buys at more reasonable valuations.
Standard deviation: 8.05, indicating lower volatility than category peers.
What makes it special: HDFC BAF uses a counter-cyclical approach. When markets fall, it increases equity exposure. When markets rally excessively, it books profits and moves to debt. This automatic contrarian strategy has delivered stellar risk-adjusted returns.
Fund Managers: Srinivasan Ramamurthy, Gopal Agrawal, Anil Bamboli Minimum SIP: ₹100 Exit Load: 1% for redemption exceeding 15% within 1 year
ICICI Prudential Balanced Advantage Fund: The Consistent Performer
The second-largest BAF at ₹68,450 crore, with a more conservative approach than HDFC BAF.
Returns: 13.9% over 5 years, 14.1% over 3 years. Lower than HDFC but with remarkably consistent performance across market cycles.
Current allocation: 66% equity (including derivatives for hedging), remaining in debt and money market instruments.
Ranking: #2 out of 18 funds in the dynamic asset allocation category according to INDmoney.
Why choose it: If you prefer steadier returns with less dramatic swings, ICICI Prudential BAF's conservative approach delivers. The fund has consistently outperformed its benchmark (Dynamic Asset Allocation Index) across 1, 3, and 5-year periods.
Expense Ratio: 0.87% Minimum SIP: ₹100
HDFC BAF vs ICICI Pru BAF: Which to Choose?
Parameter | HDFC BAF | ICICI Pru BAF |
|---|---|---|
5Y Returns | 23.0% | 13.9% |
AUM | ₹1,06,494 Cr | ₹68,450 Cr |
Expense Ratio | 0.73% | 0.87% |
Volatility | Higher | Lower |
Strategy | Aggressive counter-cyclical | Conservative dynamic |
Best For | Growth-oriented investors | Stability seekers |
Our take: HDFC BAF for higher returns with some volatility. ICICI Pru BAF for steadier, predictable growth.
Best Multi-Asset Allocation Funds
Multi-asset funds invest in at least three asset classes, typically equity, debt, and gold. This triple diversification protects against scenarios where both equity and debt underperform.
Rank | Fund Name | 5Y CAGR | 3Y CAGR | AUM (₹ Cr) | Expense Ratio |
|---|---|---|---|---|---|
1 | Quant Multi Asset | 27.1% | 21.7% | 3,201 | 0.61% |
2 | ICICI Prudential Multi Asset | 22.5% | 20.0% | 75,067 | 0.72% |
3 | Nippon India Multi Asset | 18.3% | 21.6% | 4,500 | 0.75% |
4 | UTI Multi Asset Allocation | 16.3% | 20.6% | 4,963 | 0.42% |
5 | Tata Multi Asset Allocation | 17.2% | 16.9% | 3,800 | 0.65% |
6 | SBI Multi Asset Allocation | 15.7% | 18.7% | 6,983 | 0.54% |
7 | HDFC Multi Asset | 15.0% | 15.7% | 3,844 | 0.79% |
Data as of December 2025. Source: Groww, Dhan, Angel One
ICICI Prudential Multi Asset Fund: The Category Giant
The largest multi-asset fund at ₹75,067 crore, managed by the legendary Sankaran Naren.
Asset allocation: 48% equity, 17% debt, 35% others (gold, silver, REITs, international assets).
5-year return: 22.5% with a Sharpe ratio of 1.44, the highest among multi-asset funds. This indicates exceptional risk-adjusted returns.
What makes it special: The fund actively rebalances across six asset classes based on valuations. When gold rallied in 2024, the fund had already built significant gold exposure. When equity corrected, it shifted toward debt.
Recent inflows: ₹1,890 crore in a single month, demonstrating strong investor confidence.
Best for: Investors who want exposure to gold and commodities alongside equity and debt, without managing separate investments.
Minimum SIP: ₹100 Exit Load: 1% for redemption exceeding 30% within 1 year
Quant Multi Asset Fund: The Returns Leader
The highest five-year return (27.1%) among multi-asset funds, but with higher volatility.
Asset allocation: 54% equity, 11% debt, 35% others (primarily gold and commodities).
Investment approach: Quant uses its proprietary VLRT framework (Valuation, Liquidity, Risk, Time) to make aggressive allocation shifts.
Sharpe Ratio: 0.80, lower than ICICI Prudential despite higher returns. This indicates the extra returns come with proportionally more risk.
Best for: Aggressive investors who want multi-asset diversification with maximum growth potential.
AUM: ₹3,201 crore Expense Ratio: 0.61%
UTI Multi Asset Allocation: The Cost Champion
The lowest expense ratio (0.42%) among multi-asset funds with solid 16.3% five-year returns.
Asset allocation: More balanced approach with roughly equal weights across equity, debt, and gold.
Best for: Cost-conscious investors seeking true diversification without paying premium management fees.
👉 Tip: Multi-asset funds work well as your core holding. The built-in gold allocation provides inflation hedging without you managing a separate gold investment.
Best Conservative Hybrid Funds
Conservative hybrid funds invest 75-90% in debt and only 10-25% in equity. They're ideal for risk-averse investors who want slightly better returns than pure debt funds.
Rank | Fund Name | 5Y CAGR | 3Y CAGR | AUM (₹ Cr) | Expense Ratio |
|---|---|---|---|---|---|
1 | Kotak Debt Hybrid | 12.3% | 11.5% | 3,065 | 0.50% |
2 | Aditya Birla SL Regular Savings | 12.1% | 10.2% | 1,531 | 0.90% |
3 | HDFC Hybrid Debt | 12.0% | 11.0% | 3,342 | 1.10% |
4 | SBI Conservative Hybrid | 12.0% | 10.5% | 9,787 | 1.10% |
5 | Canara Robeco Conservative Hybrid | 10.0% | 9.8% | 1,200 | 0.65% |
Data as of December 2025. Source: Scripbox, INDmoney
When to Choose Conservative Hybrid Over FDs
Conservative hybrid funds have delivered 10-12% over five years. Compare that to bank FD rates of 6-7%.
The catch: Conservative hybrids aren't guaranteed like FDs. During market crashes, the equity portion (though small) can cause temporary losses.
Tax advantage: If equity allocation exceeds 65%, they're taxed as equity funds (12.5% LTCG after 1 year). If equity is below 65%, they're taxed as debt funds, which may be less favorable.
Best for:
- Retirees seeking regular income with modest growth
- Investors within 2-3 years of a major expense
- Risk-averse NRIs who want returns above FDs but can't handle equity volatility
SBI Conservative Hybrid Fund
The largest conservative hybrid at ₹9,787 crore. Invests 21% in equity (primarily large-caps) and 74% in high-quality debt instruments.
Returns: 12% over 5 years, beating most NRE fixed deposits while maintaining relative stability.
Best for: Conservative NRIs who trust SBI's brand and want debt-like stability with some equity upside.
Arbitrage Funds: Tax-Efficient Parking
Arbitrage funds exploit price differences between cash and derivatives markets. They buy in one market and simultaneously sell in another, locking in small but consistent gains.
Key benefit: Though they maintain 65%+ equity exposure (through hedged positions), they carry almost no equity risk. Yet they're taxed as equity funds, making them more tax-efficient than liquid or debt funds.
Rank | Fund Name | 1Y Return | 3Y CAGR | AUM (₹ Cr) | Expense Ratio |
|---|---|---|---|---|---|
1 | Kotak Equity Arbitrage | 7.8% | 7.2% | 58,993 | 0.43% |
2 | ICICI Prudential Equity Arbitrage | 7.5% | 7.0% | 28,500 | 0.38% |
3 | Nippon India Arbitrage | 7.6% | 7.1% | 15,200 | 0.42% |
4 | Tata Arbitrage | 7.4% | 6.9% | 12,800 | 0.35% |
5 | Edelweiss Arbitrage | 7.5% | 7.0% | 8,900 | 0.40% |
Data as of December 2025. Source: Value Research
Kotak Equity Arbitrage Fund: The Category Leader
The largest arbitrage fund at ₹58,993 crore, delivering consistent 7-8% annual returns.
Asset allocation: 68.9% in equity (fully hedged through derivatives), 1.6% in debt, rest in cash equivalents.
Tax benefit: Gains held over 1 year are taxed at 12.5% (LTCG) versus 20-30% for debt fund gains. For NRIs in tax-free UAE, this advantage matters less, but it's significant for those with Indian tax obligations.
Best for:
- Parking money for 3-12 months while deciding on long-term investments
- Emergency fund allocation seeking better-than-savings-account returns
- Short-term goals where you can't afford equity volatility
Minimum SIP: ₹100 Exit Load: 0.25% within 30 days, nil thereafter
👉 Tip: Don't hold arbitrage funds for more than 1-2 years. For longer periods, balanced advantage or aggressive hybrid funds offer better growth potential.
Equity Savings Funds: The Middle Ground
Equity savings funds combine three components: equity (30-50%), arbitrage (20-40%), and debt (20-30%). They offer moderate returns with lower volatility than aggressive hybrids.
Rank | Fund Name | 5Y CAGR | 3Y CAGR | AUM (₹ Cr) |
|---|---|---|---|---|
1 | HDFC Equity Savings | 12.5% | 11.8% | 5,200 |
2 | Kotak Equity Savings | 11.8% | 10.5% | 4,800 |
3 | Edelweiss Equity Savings | 11.2% | 12.3% | 2,400 |
4 | ICICI Prudential Equity Savings | 10.8% | 10.2% | 6,100 |
Best for: Investors who find aggressive hybrids too volatile but conservative hybrids too slow. Equity savings funds sit exactly in between.
How Hybrid Funds Are Taxed for NRIs
Tax treatment depends on the fund's equity allocation:
Equity-Oriented Hybrids (65%+ Equity)
Applies to: Aggressive hybrid, balanced advantage, arbitrage, equity savings funds.
Holding Period | Tax Rate | Notes |
|---|---|---|
Less than 12 months (STCG) | 20% | Changed from 15% in July 2024 |
More than 12 months (LTCG) | 12.5% on gains above ₹1.25L | Changed from 10% above ₹1L |
Debt-Oriented Hybrids (Below 65% Equity)
Applies to: Conservative hybrid funds.
Holding Period | Tax Rate | Notes |
|---|---|---|
Any duration | Added to income, taxed at slab rate | No indexation benefit post-April 2023 |
TDS Deduction for NRIs
Banks and AMCs deduct TDS at source:
- STCG: 20%
- LTCG: 12.5%
You can claim refunds when filing ITR if TDS exceeds actual liability.
Tax Optimization Strategy
Harvest gains annually. Redeem up to ₹1.25 lakh in long-term gains each financial year tax-free. For larger portfolios, split redemptions across two financial years (March and April).
Choose equity-oriented hybrids. The 12.5% LTCG rate is more favorable than slab-rate taxation on debt-oriented funds.
For detailed guidance, use our NRI tax filing service or check DTAA benefits available to UAE residents.
A Tax-Free Alternative: GIFT City Funds
Here's what most NRIs overlook: GIFT City mutual funds offer potentially tax-free returns for UAE residents.
Under Section 10(4D) of the Income Tax Act, capital gains from GIFT City funds are exempt from Indian tax. Combined with UAE's zero-tax environment, you effectively pay 0% on investment gains.
Regular Hybrid vs GIFT City Comparison
Parameter | Regular Hybrid Fund | GIFT City Alternative |
|---|---|---|
STCG Tax | 20% | 0% (for UAE NRIs) |
LTCG Tax | 12.5% above ₹1.25L | 0% (for UAE NRIs) |
Currency | INR | USD |
TDS | Yes | No |
Rupee Risk | Fully exposed | Protected |
The Math
Invest ₹50 lakh in an aggressive hybrid earning 18% annually for 10 years:
- Regular fund: Corpus ₹2.34 crore, Tax on gains ~₹23L = Net ₹2.11 crore
- GIFT City: Corpus ₹2.34 crore, Tax = ₹0 = Net ₹2.34 crore
That's ₹23+ lakh saved purely through tax efficiency.
Explore options through our GIFT City mutual funds explorer. Funds like DSP Global Equity Fund and Tata India Dynamic Equity Fund offer diversified exposure with tax advantages.
Which Hybrid Fund Category Suits You?
Conservative Investor (Capital Preservation Priority)
Allocation | Category | Recommended Fund |
|---|---|---|
60% | Conservative Hybrid | SBI Conservative Hybrid |
20% | Arbitrage | Kotak Equity Arbitrage |
20% | HDFC Short Term Debt |
Expected returns: 9-11% with minimal volatility
Moderate Investor (Balanced Growth & Safety)
Allocation | Category | Recommended Fund |
|---|---|---|
50% | Balanced Advantage | HDFC Balanced Advantage |
30% | Multi-Asset | ICICI Prudential Multi Asset |
20% | Equity Savings | HDFC Equity Savings |
Expected returns: 14-16% with moderate volatility
Growth-Oriented Investor (Returns Priority)
Allocation | Category | Recommended Fund |
|---|---|---|
60% | Aggressive Hybrid | ICICI Prudential Equity & Debt |
25% | Multi-Asset | Quant Multi Asset |
15% | Parag Parikh Flexi Cap |
Expected returns: 18-22% with higher volatility
How Hybrid Funds Perform in Different Markets
Bull Markets
Aggressive hybrids and high-equity balanced advantage funds outperform. HDFC BAF's 23% five-year return includes strong bull market performance because it maintained high equity allocation during rallies.
Bear Markets
Conservative hybrids and low-equity balanced advantage funds protect capital. The debt portion cushions equity losses. ICICI Pru BAF's consistent returns come from its defensive positioning during corrections.
Sideways Markets
Arbitrage and equity savings funds shine. When markets move sideways, arbitrage strategies continue generating 7-8% returns regardless of direction.
Inflationary Periods
Multi-asset funds with gold exposure outperform. Gold typically rises during inflation, offsetting equity and debt underperformance.
Common Mistakes to Avoid
1. Treating All Hybrids as Equal
An aggressive hybrid with 80% equity is fundamentally different from a conservative hybrid with 20% equity. Match the fund's risk profile to your tolerance.
2. Chasing Recent Returns
Quant funds topped recent charts but with higher volatility. Past returns don't guarantee future performance, especially with aggressive strategies.
3. Ignoring Expense Ratios
The difference between 0.40% (Edelweiss) and 1.10% (SBI Conservative) compounds significantly over decades. Choose Direct plans and compare costs.
4. Over-Diversifying Within Hybrids
One good balanced advantage fund or aggressive hybrid is enough. Holding 3-4 funds from the same category creates overlap without additional diversification.
5. Missing Tax-Efficient Alternatives
UAE NRIs paying 12.5-20% tax unnecessarily. GIFT City investments offer potentially zero tax on identical strategies.
How to Invest in Hybrid Funds as an NRI
Step 1: Complete KYC
Required documents:
- PAN card
- Passport with valid visa
- Overseas address proof
- Passport-size photograph
Most AMCs offer video KYC for remote completion.
Step 2: Open NRE/NRO Account
You'll need an Indian bank account for investments:
- NRE account: Full repatriation of principal and gains
- NRO account: ₹1 million annual repatriation limit
Compare options using our NRI FD comparison tool.
Step 3: Choose SIP or Lump Sum
SIP works better for most investors. Regular investments average out purchase prices across market cycles.
Lump sum works when you have a windfall (gratuity, bonus) and markets appear reasonably valued.
Step 4: Select Direct Plans
Always choose Direct plans to avoid distributor commissions. This saves 0.5-1% annually.
FAQs
Which hybrid fund is best for NRIs in 2025?
For growth: ICICI Prudential Equity & Debt (aggressive hybrid) or HDFC Balanced Advantage (dynamic allocation). For stability: SBI Conservative Hybrid. For tax efficiency, consider GIFT City alternatives.
Is hybrid fund better than FD for NRIs?
Equity-oriented hybrids have historically delivered 15-23% versus 6-7% from FDs. But hybrids carry market risk. For guaranteed returns, stick with FCNR deposits. For growth potential with some stability, hybrid funds work well.
What is the difference between balanced advantage and aggressive hybrid?
Aggressive hybrids maintain fixed 65-80% equity allocation. Balanced advantage funds dynamically adjust equity from 0-100% based on market valuations. BAFs offer more automatic risk management.
How much should I invest in hybrid funds?
Financial advisors typically recommend 30-50% of your portfolio in hybrid funds as the core holding. Supplement with pure equity for growth or debt for stability based on your goals.
Are hybrid mutual funds taxable for NRIs?
Yes. Equity-oriented hybrids (65%+ equity) attract 20% STCG (under 1 year) and 12.5% LTCG on gains above ₹1.25 lakh. Debt-oriented hybrids are taxed at your income slab rate. TDS is deducted at source for NRIs.
Which is better: HDFC BAF or ICICI Pru BAF?
HDFC BAF offers higher returns (23% vs 14% over 5 years) with more volatility. ICICI Pru BAF delivers steadier, consistent performance. Choose HDFC for growth, ICICI for stability.
Take Your Next Step
Hybrid funds give NRIs the balance they need: growth from equity, stability from debt, and professional rebalancing without constant monitoring.
For tax-efficient investing, explore GIFT City mutual funds that offer potentially zero tax on capital gains. Check your residential status to understand which rules apply to you.
Use Belong's NRI FD Comparison Tool to compare stable alternatives for the conservative portion of your portfolio.
Have questions about which hybrid fund category matches your situation? Join our WhatsApp community where many NRIs discuss their investment strategies daily. Or download the Belong app to start investing in tax-efficient GIFT City products.
Disclaimer: Mutual fund investments are subject to market risks. Past performance does not guarantee future returns. Rankings in this article use transparent criteria and should not be considered investment recommendations. Consult a SEBI-registered advisor before investing.
Published: December 2025 Author: Ankur Choudhary, CEO, Belong | SEBI-Registered Investment Advisor
