Hybrid fund flows slowed sharply in second half of FY25

21 May 2025 , 10:06 AM

HYBRID ALLOCATION FUNDS – MACRO STORY OF FY25

Unlike active equity funds, which had a year of record flows, the story of hybrid allocation funds was relatively more mixed. While 66% of the full year flows came in the first half of FY25, just 34% came in the second half of the year. For FY25, total net inflows into hybrid allocation funds stood at ₹1,22,325 Crore, belying the early enthusiasm. The drying up of hybrid fund NFOs in the second half also took its toll on the flow numbers.

If you look at the 8 hybrid fund categories (including solution-oriented funds) across 12 months, then  you have 96 data flow points. Out of these 8 categories of hybrid funds; conservative hybrid funds saw net outflows in 10 out of 12 months due to the unfavourable tax treatment of debt funds. Arbitrage funds had negative flows in 4 out of 12 months, but that is more due to quarter-end treasury management. The key hybrid categories like Aggressive Hybrids, BAFs, and MAAFs saw positive flows in all 12 months. After a long gap, March 2025 saw overall outflows from hybrid funds.

WHAT DO MONTHLY HYBRID FUND FLOWS TELL US?

The table below captures the monthly net flows into hybrid allocation funds in FY25, classified across 6 hybrid and 2 solution funds. Here is a quick dekko.

Equity Fund Categories	Apr-24	May-24	Jun-24	Jul-24	Aug-24	Sep-24	Oct-24	Nov-24	Dec-24	Jan-25	Feb-25	Mar-25
Multi-Cap Fund	-8	-99	-131	26	-187	-126	311	-37	-170	-194	-81	-271
Large Cap Fund	17	43	49	195	321	516	1,371	914	328	633	310	294
Large & Mid Cap Fund	1,345	1,279	644	1,798	3,215	1,704	2,456	1,570	1,596	1,512	664	776
Midcap Fund	3,313	3,161	3,453	3,126	2,827	4,070	3,797	2,444	2,575	2,123	2,228	1,670
Small Cap Fund	13,901	12,758	3,837	11,015	2,372	-3,532	7,182	-1,353	-409	4,292	3,592	-2,855
Dividend Fund	1,295	849	1,003	1,277	1,457	2,269	1,748	586	451	402	90	-561
Contra Fund	177	398	125	147	133	136	208	166	133	102	109	108
Focused Fund	70	68	59	79	95	96	118	153	201	141	137	133
Monthly Totals	20,110	18,456	9,039	17,663	10,233	5,134	17,189	4,443	4,703	9,011	7,050	-705

Data Source: AMFI

Total net inflows into hybrid allocation funds in FY25 stood at ͅ₹1,22,325 Crore. Flows did disappoint after a sturdy start. In 6 out of 12 months, the net inflows into hybrid funds exceeded ₹10,000 Crore, with just one instance of over ₹20,000 crore. However, the dichotomy between the first half and second half was quite apparent. Around 66% of the FY25 flows came in the first 6 months and 80% in the first 7 months. In short, the hybrid inflows from November 2024 onwards was relatively tepid.

WHICH HYBRID FUND CATEGORIES DOMINATED FLOWS IN FY25?

Like periodic concentration of hybrid fund flows, there was also category-wise concentration of flows. Despite 4 months of negative flows in FY25, the Arbitrage Funds still accounted for 41.5% of FY25 flows into hybrid allocation funds. Out of the 8 categories of hybrid and solution funds, just 2 categories (Arbitrage Funds and Multi-Asset Allocation Funds) accounted for 70% of full year flows.

What were the broad themes emanating from hybrid fund flows in FY25? Arbitrage Funds, which is a quasi-debt fund, accounted for 41.5% of overall flows. Among genuine hybrids, multi-asset allocation funds (MAAF) accounted for 28.4% of FY25 flows, indicating that there was still appetite for spreading allocation risk across various asset classes. If you look at hybrid allocation as a theme; then MAAFs, BAFs, and Equity Savings Funds accounted for 52.5% of FY25 flows. This indicates there is still appetite for managing risk through hybrid funds. However, traditional hybrids appear to be losing charm among investors!