The mutual fund (MF) hybrid space is seeing a flurry of product launches under the erstwhile debt taxation framework as the current financial year 2023-24 (FY24) draws to a close. The demand for debt taxation products are higher in the latter part of a financial year as investors look to cash in on an additional year of indexation benefit.
Parag Parikh Financial Advisory Services (PPFAS) MF has launched a balanced advantage fund. Mahindra Manulife and Quantum have also come out with multi-asset allocation funds. All three schemes will maintain around 35-65 percent equity allocation with the rest in fixed-income instruments. Multi-asset funds will also have some exposure to gold.
PPFAS MF and Quantum MF plan to keep the equity allocation near the lower band of the minimum required to offer a low-volatility product. PPFAS MF plans to use arbitrage strategies to lower the equity component further.
"It makes sense to launch debt-focused hybrid funds right now as yields are elevated. Also, the curve is flat and the liquidity is tight. In the next 15-18 months, there is also a possibility of rate cuts and hence scope for capital gains.
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