The Axis equity hybrid fund is a newly launched actively managed open-ended equity oriented hybrid scheme from Axis Mutual Fund AMC, one of India’s leading fund houses. The primary investment focus of this scheme would be equities and equity-related instruments with debt investments accounting for a minority portion of the scheme’s portfolio.
About Equity-Oriented Hybrid Schemes:
Hybrid schemes refer to mutual funds that invest both in equity and debt instruments. However, equity-oriented hybrid schemes invest a major portion of their investible assets in equities and equity–related instruments with debt and debt-related instruments accounting for a relatively smaller portion of the portfolio. The equity portion of equity-oriented hybrid schemes is usually designed to provide capital appreciation in the long term. On the other hand, the debt investments of these schemes are usually designed to increase portfolio liquidity and contain losses during bearish equity market conditions.
This page covers the following:
#Key NFO Information for Prospective
#Minimum Investment Requirement
#Equity Investment Strategy
#Debt Investment Strategy
#Key Risks and Mitigation Strategies
#Taxation Considerations for Investors
#Who Should Invest
#How to Invest
Key NFO Information for Prospective
Being a new scheme, the Axis Equity Hybrid Fund from Axis Mutual Fund AMC is being introduced as a NFO or new fund offer from the 20th of July 2018. The scheme’s NFO period will end on the 3rd of August 2018. Subsequent to the completion of the NFO period, continuous redemption and purchase of the scheme’s units will be available to investors.
Minimum Investment Requirement for the Axis Equity Hybrid Fund NFO:
Prospective NFO investors of the Axis Equity Hybrid Fund scheme will need to invest a minimum lump sum of Rs. 5000. Higher initial investments amounts can be in multiples of Re.1 over the Rs. 5000 minimum investment. If an investor seeks to make additional investments into the scheme at a later date, he/she is allowed to do so for a minimum amount of Rs. 100 and in multiples of Re. 1 thereafter.
Axis Equity Hybrid Fund Exit Load:
Since the abolition of entry loads, prospective investors only have to worry about exit loads applicable to their mutual fund investments. Axis Equity Hybrid fund features an exit load of 1% if over 10% of allocated fund units are redeemed prior to completion of 12 months from the date of unit allocation. So effectively, if an investor redeems all his/her units prior to completion of 12 months from unit allocation date, the 1% exit load will be applicable to only 90% of the redeemed units. Any unit redemptions made after completion of the 12 month period will have zero exit load.
Key Information about the Axis Equity Hybrid Fund:
The following is some key information related to the Axis Equity Hybrid Fund*:
|Fund House||Axis Mutual Fund AMC|
|Scheme Category||Equity-Oriented Hybrid (Aggressive)|
|NFO Period||20th July, 2018 to 3rd August, 2018.|
|Scheme Benchmark||CRISIL Hybrid 35+65 – Aggressive Index (erstwhile CRISIL Balanced Fund Index)|
|Fund Managers||Shreyash Devalkar (Equity), Ashish Naik (Equity) and R. Sivakumar (Debt).|
*The scheme data is indicative and subject to periodic change based on fund strategy requirements and SEBI guidelines.
Expected Asset Allocation by the Axis Equity Hybrid Fund:
As provided in the scheme NFO documentation, the asset allocation of Axis Equity Hybrid Fund is expected to be as follows*:
|Investment Type||Indicative Scheme Allocation|
|Equity and Equity-Related Instruments||65% to 80% of investible assets|
|Debt and Money Market Instruments||20% to 35% of investible assets|
*The investment allocation data are indicative pending commencement of scheme operations.
Equity Investment Strategy of Axis Equity Hybrid Fund:
The equity investments of the new Axis Equity Hybrid Fund are expected to feature a bottom-up selection strategy with a multi-cap equity investment approach. Furthermore, though diversified, equity investments made by this Axis mutual fund are expected to feature a large cap bias with mid-cap allocation capped at 30% of the total equity portfolio value. As a result of this unique equity investment approach, the scheme is expected to provide the following key benefits to its investors:
- Potentially favorable risk/return tradeoff over the medium term through optimal diversification
- High growth potential through greater focus on fast-growing sectors
- Greater possibility of long term outperformance through diversified investments
Debt Investment Strategy of Axis Equity Hybrid Fund:
The debt investments of this Axis mutual fund scheme would mainly include corporate bonds and sovereign bonds. The mix of these debt instruments will be based on tactical calls made by the fund manager in line with anticipated debt market movements determined through in-depth research. Some of the key features of this unique debt investment strategy are as follows:
- Flexibility to choose and invest in a variety of debt instruments irrespective of duration/credit quality
- Active duration management of debt portfolio instruments
- Credit quality mix will vary based on anticipated market movements determined through in-depth research
Key Risks and Mitigation Strategies for the Axis Equity Hybrid Fund:
The following are some key risks and mitigation strategies that prospective investors need to keep in mind before investing in Axis Equity Hybrid Fund:
Liquidity Risk: Equity investments can be illiquid in nature especially during equity market bear phases when it is almost impossible to get fair value through redemption. In case of the Axis Equity Hybrid Fund, up to 35% of the scheme’s investible assets would be held in debt instruments, which can provide much needed liquidity during emergency situations.
Volatility Risk: All equity and equity-related investments are prone to volatility due to price fluctuations that occur during trading hours. These price fluctuations are highest in case of pure equity investments. In case of Axis Equity Hybrid fund, the hybrid nature of the portfolio mitigates this risk to a certain extent through actively managed debt instruments that feature potentially lower overall volatility risk.
Credit Risk: Credit risk is unique to debt investments and results from investments made into relatively lower quality debt investments that capitalize on the benefit of higher coupon rates offered by such investments. The actively managed nature of this debt portfolio will continually seek to ensure an optimal mix of bonds to ensure minimization of credit risk for the overall debt portfolio.
Interest Rate Risk: Longer duration bonds are particularly susceptible to changes in market interest rates. To manage the overall interest rate risk of the scheme’s debt portfolio, the fund manager would engage in active duration management. By investing in bonds with varying durations, the Axis Equity Hybrid Fund would thus seek to minimise the scheme’s overall interest rate risk.
Taxation Considerations for Investors of the Axis Equity Hybrid Fund:
Being an equity-oriented hybrid scheme, the Axis Equity Hybrid Fund would be taxed as per currently applicable equity investment taxation rules. Short term capital gains (STCG) tax rules will be applicable if redemptions of this scheme’s units are made within 1 year of unit allocation. The applicable rate of STCG on capital gains from this fund is 15% of total gains. Long term capital gains (LTCG) tax rules will be applicable if redemption of units occurs after 1 year from date of unit allocation. LTCG is nil in case gains obtained across all equity redemptions made by an investor during a financial year is less than Rs. 1 lakhs. LTCG of over Rs. 1 lakh if obtained from equities is taxed at 10% on the incremental amount.
Dividends earned by an investor through investments made into the Axis Equity Hybrid Fund are tax free in the hands of the investor. However, dividend payouts in case of equity funds are subject to 10% dividend distribution tax (DDT) that is deducted by the fund house and paid to the tax authorities directly. The DDT payout occurs before the dividend payout reaches the hands of the investor.
Who Should Invest in the Axis Equity Hybrid Fund?
Considering the unique features of this aggressive open-ended hybrid scheme, the following types of investors are expected to invest in this fund:
- Investors who are seeking a medium to long-term tax efficient hybrid investment.
- Investors seeking an optimal balance between risk and returns from their mutual fund investments.
- Investors seeking adequate liquidity in their portfolio without sacrificing potentially high equity returns.
- Investors seeking a retirement solution that balances risk and returns in the long term.
- Those who want to plan for their child’s future education expenses using a hybrid investment.
- Institutional investors who seek a medium to long-term investment with balanced levels of risk.
How to Invest in Axis Equity Hybrid Fund:
Prospective investors can purchase units of the Axis Equity Hybrid Fund during the NFO period through either the offline or the online route. Axis Equity Hybrid Fund direct plan investments can be made online by prospective investors through Paisabazaar.com. In case of investors who are already registered and KYC compliant, only online payment needs to be made through net banking to purchase Axis Equity Hybrid Fund units during the NFO period of 20th July to 3rd August. In case the investor is new to the Paisabazaar.com mutual fund platform, he/she will have to sign up for a free mutual fund investment account and undergo SEBI-mandated eKYC or video KYC before purchasing scheme units during the NFO period. The entire process of signing up, eKYC and investment can be easily completed online from the convenience of one’s home or office.
In case the investor prefers the offline route, he/she needs to visit the nearest representative office of Axis Mutual Fund AMC, nearby Karvy RTA office or a brokerage involved in the NFO. Documents required for offline NFO investment include a completely filled out investment form and a cheque for the amount to be invested in the Axis Equity Hybrid Fund NFO.