Large cap funds versus Aggressive Hybrid Funds

29 Jan 2026 , 12:42 PM

LARGE CAP FUNDS VERSUS AGGRESSIVE HYBRID FUNDS

With the rising importance of hybrid fund, another category of funds that is seen as an alternative to a large cap equity fund is the Aggressive Hybrid Fund. As the name suggests, the fund will mix equity, debt, and money market instruments. Being an aggressive hybrid fund, it will ensure to invest 65% to 80% of the corpus in equities, and the balance in debt and money markets. The advantages are two-fold. Firstly, the predominant equity portion will still support long term wealth creation. At the same time the exposure to debt offers stability to the portfolio, and is especially useful in volatile years.

We look at how large cap funds performed in terms of flows and returns; compared to the aggressive hybrid funds. An aggressive hybrid fund is almost like an equity fund with a small debt component for stability and predictability of returns. Since aggressive hybrid funds will  keep more than 65% of corpus in equity, they will be treated as equity funds for the purpose of LTCG / STCG determination and the rates of tax. Here is a quick look at large cap flows over the last one year.

MONTHLY FLOWS INTO LARGE CAP MUTUAL FUNDS IN LAST 1 YEAR

The Monthly flows into large cap funds have been relatively subdued, although flows into equity funds were quite strong. That is because, most of the flows gravitated towards thematic funds, small / mid-cap funds, and multi-cap / Flexi-cap funds.

Monthly Data	Net Flows (₹ Crore)	AUM (₹ Crore)	Flow Ratio
Nov-25	1,639.80	4,18,524.98	0.39%
Oct-25	971.97	4,10,156.51	0.24%
Sep-25	2,319.04	3,95,093.32	0.59%
Aug-25	2,834.88	3,89,982.59	0.73%
Jul-25	2,125.09	3,91,762.73	0.54%
Jun-25	1,694.33	3,97,470.47	0.43%
May-25	1,250.47	3,83,666.59	0.33%
Apr-25	2,671.46	3,74,519.71	0.71%
Mar-25	2,479.31	3,59,775.39	0.69%
Feb-25	2,866.00	3,35,387.55	0.85%
Jan-25	3,063.33	3,54,365.83	0.86%
Dec-24	2,010.98	3,58,671.88	0.56%
Data Source: AMFI

The flow ratio (ratio of net flows to net AUM) gives a picture of the significance of flows. In each of the last 12 months, the flow ratio was under 1.0%. As a share of net AUM, the monthly flows into large cap funds averaged a flow ratio of 0.58% and an annual flow ratio of 6.19%. Being a relative measure, the flow/AUM ratio captures the significance of flows more eloquently.

MONTHLY FLOWS INTO AGGRESSIVE HYBRID FUNDS IN LAST 1 YEAR

The table below captures the net flows into Aggressive Hybrid funds (MAAF) on a monthly basis over last 1 year. The interest in this fund has been relatively low, as most people plumped for MAAFs in the hybrid space due to its additional exposure to gold, silver and REITs. Here is a quick dekko.

Monthly Data	Net Flows (₹ Crore)	AUM (₹ Crore)	Flow Ratio
Nov-25	1,385.34	2,53,121.18	0.55%
Oct-25	1,139.18	2,50,052.41	0.46%
Sep-25	2,013.73	2,41,559.83	0.83%
Aug-25	1,870.40	2,36,817.91	0.79%
Jul-25	2,363.56	2,37,969.21	0.99%
Jun-25	1,331.50	2,38,686.36	0.56%
May-25	341.39	2,31,900.98	0.15%
Apr-25	-151.47	2,26,008.04	-0.07%
Mar-25	293.71	2,19,203.86	0.13%
Feb-25	310.13	2,07,879.45	0.15%
Jan-25	633.00	2,18,007.38	0.29%
Dec-24	327.63	2,21,192.29	0.15%
Data Source: AMFI

Compared to other hybrid categories, flows into aggressive hybrid funds have been relatively subdued. Most investors preferred other categories like gold and silver ETFs as well as the arbitrage opportunities in equity savings funds to boost returns. Let us turn to significance of these flows. As a share of net AUM, monthly flows into Aggressive Hybrid Funds averaged flow ratio of 0.41% and annual flow ratio of 26.84%. The data is pointing towards rising interest in this category of funds.

LARGE CAP FUNDS AND AGGRESSIVE HYBRIDS SHOW?

Let us look at how the top 8 large cap funds performed on 5-year returns?

Large Cap Fund Scheme Name	Return (%) 1-Year	Return (%) 3-Years	Return (%) 5-Years
Nippon India Large Cap Fund	9.32	20.19	21.10
ICICI Prudential Large Cap Fund	11.18	18.71	18.58
HDFC Large Cap Fund	7.84	16.51	17.89
Invesco India Large cap Fund	6.00	18.71	17.25
Tata Large Cap Fund	9.54	16.21	16.99
Mahindra Manulife Large Cap Fund	10.38	16.23	16.58
Kotak Large Cap Fund	9.18	16.88	16.34
Bandhan Large Cap Fund	8.28	18.71	16.25
Data Source: AMFI

In case of large cap funds, the one-year returns have been fairly volatile. However, the returns over the 3-year period and the 5-year period have been relatively more stable and predictable. Only funds with 5-year track record are considered for these rankings. Large cap funds delivered average returns of 7.68% over 1 year, 16.17% over 3 years, and 15.48% CAGR over 5 years. Let us now turn to the performance of Aggressive Hybrid Funds.

Aggressive Hybrid Funds Scheme Name	Return (%) 1-Year	Return (%) 3-Years	Return (%) 5-Years
ICICI Prudential Equity & Debt Fund	13.59	20.11	22.56
BOI Mid & Small Cap Equity & Debt Fund	-0.21	19.88	20.77
Quant Aggressive Hybrid Fund	11.28	13.58	19.42
Mahindra Manulife Aggressive Hybrid Fund	9.50	18.84	18.80
Edelweiss Aggressive Hybrid Fund	7.19	18.83	18.43
JM Aggressive Hybrid Fund	-2.16	19.78	18.27
UTI Aggressive Hybrid Fund	6.90	17.64	17.75
Kotak Aggressive Hybrid Fund	5.27	16.59	17.02
Data Source: AMFI

In the case of aggressive hybrid funds, the last 1 year may have been volatile but have generated CAGR returns in excess of 15% over the year. Aggressive Hybrid Funds delivered average returns of 6.52% over 1 year, 15.93% CAGR over 3 years, and 15.54% CAGR over 5 years. One must note that the returns on the top 8 funds has been substantially better.

KEY TAKEAWAYS: LARGE CAP FUNDS VS AGGRESSIVE HYBRIDS

In the last one-year, Aggressive Hybrids struggled to create the mind-space for a unique product positioning. The question is whether they can really emerge as an alternative.

1. Unlike MAAFs, the short-term returns on aggressive hybrids were sharply lower than large cap equity funds, while the longer-term returns were relatively stable.
2. Flows into aggressive hybrid funds have been tepid as is evident from the flows into aggressive hybrid funds.
3. Unlike the MAAFs that invest in gold and silver, the aggressive hybrid funds only invests in short term and long-term debt. This reduces their options.
4. What investors will miss out in aggressive hybrids is the exposure to gold and silver; which gave stellar returns last year and are also solid hedges against equities.
5. For investors who want to churn equity versus debt in a cost-efficient manner, Aggressive Hybrids can still be a good option as they are tax-efficient too.

The standard caveat is that your asset allocation should be based on your unique goals. However, aggressive hybrids can be a good option to exposure yourself to equities with checks and balances built in.

LLM Summary If flows into large cap fund were tepid in the last one year, the flows into aggressive hybrid funds have been no better. However, aggressive hybrids are a good option to churn between equity and debt in a tax efficient manner, without getting too involved. Large cap funds have done better than aggressive hybrid funds, but that is more due to the higher level of short-term returns. Over the longer time frame of 3-5 years, even returns on aggressive hybrid funds are fairly attractive, although the idea is yet to take off. Flows into aggressive hybrid funds have been very tepid; even lower than large cap funds. Clearly, investors are yet to reconcile with the idea of adding debt to their portfolio when the returns on debt are fairly tepid. It is relatively more stable than pure equity. The biggest advantage is that aggressive hybrids bring to the table is the stability and the resilience against all odds. Above all, they offer a tax efficient portfolio of constantly switching between equity and F&O!