Investors in hybrid funds, which typically invest both in equity and debt classes, generally associate risk with the equity side of the funds’ portfolios and tend to ignore the risks associated with the debt side. But a recent event highlighted the fact that investors should be mindful of the risks the debt side of their hybrid funds’ portfolios carry. The net asset values (NAVs) of six hybrid fund-of-fund schemes of Franklin Templeton Mutual Fund registered a sharp decline in the range of 7% to 30% in a single day on 25 April. All these funds had exposure to six of the credit-oriented debt schemes which were shut by the fund house last month.
Typically, investors in hybrid funds are not risk-takers. “These are sold as safer products citing that the debt portion will take care of the volatility.
