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At a time when debt funds are going through a lean patch, most MFDs are looking for alternatives to help clients realise their medium-term goals. This search has led most MFDs to consider a hybrid option, shows a survey conducted by Cafemutual.
54% of the participants in the poll said they are recommending hybrid funds to clients having investment horizon of 3-4 years. Another 30% were also in the favour of hybrid option but said they would prefer to do it themselves (by investing the corpus in a mix of equity and debt funds).
The rest of the votes went to target maturity funds (10%) and bank FDs (6%).
Debt funds have fallen out of favour for quite some time now. Our previous survey also revealed that MFDs are recommending hybrid funds and corporate FDs in scenarios where they would have earlier gone for debt funds.
"From a medium-term perspective, the conservative approach would be to go for hybrid funds. The choice of fund should depend on the client's risk appetite as both conservative hybrid and balanced advantage are good options right now," said Varanasi MFD Garvit Chaharia.
Mumbai MFD Sadashiv Phene also shared a similar view. "Debt funds are fine for the short term as yields have now gone up a bit. But for a 3-4 year time frame, conservative hybrid funds are better as equity exposure gives extra push to returns," he said.
However, a few MFDs have a different view. Babu Krishnamoorthy of Finsherpa Investment Services said he is confident that debt funds can deliver 6-6.5% return in the medium term, given the prevailing yield-to-maturity.
"Now is the time to handhold clients because when they open their portfolio and see 3% return, they get jittery. We need to explain to them the concepts and help them calm their nerves," he said.
P2P lending, other new avenues gain traction
The situation in the fixed income space has proved to be a blessing for options beyond debt funds like P2P lending, invoice discounting and others.
Viral Bhat of Money Mantra said he is recommending hybrid funds for the 3-4 year period but in the short-term horizon he is exploring newer options. "I am suggesting P2P to clients for the last 1-2 years. It is a good option, provided the investment is liquid. I am also looking at bill discounting but have not yet recommended it to clients," he said.
