Recent filings with Sebi show several industry-first offerings in the pipeline, including Motilal Oswal MF’s Multi Thematic Active Fund of Funds (FoF), DSP Mutual Fund’s Financial Services Sectoral Debt Fund, AlphaGrep Mutual Fund’s Liquid Omni FoF and HDFC MF’s FTSE India ETF.
At least four balanced hybrid funds are also awaiting launch.
Recent regulatory changes have opened up the scope for most of these offerings. In February, Sebi revised its MF scheme categorisation framework and introduced the sectoral debt category, creating room for products such as DSP MF’s financial services-focused debt scheme. The regulator also formally categorised fund of funds, paving the way for new product structures such as Motilal Oswal’s Multi Thematic Active FoF.
The changes have also reopened the door for balanced hybrid funds. Under the earlier framework, fund houses generally had to choose between aggressive hybrid and balanced hybrid funds, with most opting for the former. Sebi’s latest framework allows an asset management company (AMC) to offer both categories, paving the way for the return of balanced hybrid funds.
ICICI Prudential MF has already launched a scheme, while UTI MF, SBI MF, Kotak MF and Baroda BNP Paribas MF have secured product approvals.
According to experts, the category is likely to attract investor interest despite its similarities with balanced advantage funds (BAFs).
“The advantage of the new balanced hybrid funds is that the asset allocation mix is in a much tighter range of 40-60 per cent, thereby giving investors a far more balanced exposure than BAFs where the range can be much larger and fund managers have far more discretion. That can work well when the asset allocation decision is right, but can also backfire if the calls go wrong,” said Vishal Dhawan, founder and chief executive officer (CEO), Plan Ahead Wealth Advisors.