How Debt and Hybrid funds did in August 2023
Bond markets had witnessed a bounce in yields in early part of August these yields tapered once again towards the end of the month. For August, 10-year benchmark bond yields closed at 7.17% compared to 7.18% at the close of July 2023; that is as flat as flat can get. IN the first half of August, the surge in July inflation to 7.44% had an immediate effect on the bond yields, as it spiked sharply. However, this was offset by falling US bond yields and a surge of liquidity at the short end of the money market. Markets have now started to bet that RBI may not hike rates for now and that has led to tapering of yields.
While debt funds gave a stable performance shorter end fund did better as the volatility helped them earn better yields. Hybrid funds did benefit where the equity component was significant as in the case of aggressive hybrid funds and the dynamic allocation funds (or discretionary BAFs). Let us look at how the long term debt funds, shorter end treasury funds and the hybrid funds performed in the month of August 2023.
Table of Content
- How Debt and Hybrid funds did in August 2023
- How aggressive Balanced Funds did in August 2023
- How conservative Balanced Funds did in August 2023
- How dynamic Asset Allocation Funds did in August 2023
- How Gilt Funds did in August 2023
- How Corporate Bond Funds did in August 2023
- How Credit Risk Funds did in August 2023
- How Liquid Funds did in August 2023
- How Arbitrage Funds did in August 2023
- What we read from the Non-Equity Fund rankings
How aggressive Balanced Funds did in August 2023
Top performers (Growth Option – Direct Plan) on 5-year returns (as on 31st Aug-23):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
| Quant Absolute Fund | 8.842% | 29.045% | 19.974% |
| ICICI Pru Equity & Debt | 17.847% | 28.225% | 16.218% |
| BOI S&M Equity and Debt | 21.827% | 28.573% | 14.759% |
| Category Average | 12.673% | 19.393% | 11.516% |
| CRISIL MIF Blended Index PR | 7.394% | 7.449% | 8.676% |
How conservative Balanced Funds did in August 2023
Top performers (Growth Option – Direct Plan) on 5-year returns (as on 31st Aug-23):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
| Kotak Debt Hybrid | 10.405% | 12.753% | 10.985% |
| SBI Conservative Hybrid | 11.088% | 12.961% | 10.366% |
| Canara Robeco Hybrid | 7.858% | 9.485% | 9.707% |
| Category Average | 7.749% | 9.779% | 7.406% |
| CRISIL MIF Blended Index PR | 7.394% | 7.449% | 8.676% |
How dynamic Asset Allocation Funds did in August 2023
Top performers (Growth Option – Direct Plan) on 5-year returns (as on 31st Aug-23):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
| HDFC BAF | 20.287% | 26.991% | 14.504% |
| Edelweiss BAF | 10.977% | 16.258% | 12.005% |
| ICICI Prudential BAF | 10.727% | 15.098% | 11.334% |
| Category Average | 10.747% | 13.160% | 9.402% |
| Benchmark Index | N.A. | N.A. | N.A. |
How Gilt Funds did in August 2023
Top performers (Growth Option – Direct Plan) on 5-year returns (as on 31st Aug-23):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
| DSP G-Sec Fund | 7.654% | 5.750% | 9.009% |
| SBI Magnum Gilt Fund | 8.412% | 6.039% | 8.848% |
| Bandhan G-Sec Fund | 6.582% | 4.849% | 8.799% |
| Category Average | 6.629% | 4.758% | 7.645% |
| I-SEC MIBEX Index TR | 6.645% | 5.085% | 7.835% |
How Corporate Bond Funds did in August 2023
Top performers (Growth Option – Direct Plan) on 5-year returns (as on 31st Aug-23):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
| HSBC Corporate Bond | 6.172% | 4.957% | 8.146% |
| ABSL Corporate Bond | 7.068% | 5.673% | 7.721% |
| HDFC MF Corporate Bond | 7.074% | 5.566% | 7.690% |
| Category Average | 6.483% | 4.957% | 6.846% |
| CRISIL ST Bond Fund Index PR | 6.698% | 5.224% | 7.163% |
How Credit Risk Funds did in August 2023
Top performers (Growth Option – Direct Plan) on 5-year returns (as on 31st Aug-23):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
| ICICI Pru Credit Risk Fund | 7.236% | 7.305% | 8.224% |
| HDFC Credit Risk Fund | 6.954% | 7.315% | 8.023% |
| Baroda Credit Risk Fund | 7.953% | 11.866% | 7.781% |
| Category Average | 7.074% | 9.773% | 4.834% |
| CRISIL ST Bond Fund Index PR | 6.698% | 5.224% | 7.163% |
How Liquid Funds did in August 2023
Top performers (Growth Option – Direct Plan) on 5-year returns (as on 31st Aug-23):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
| Quant Liquid Plan | 6.671% | 5.189% | 5.852% |
| Mahindra Manulife Liquid | 6.866% | 4.745% | 5.390% |
| Edelweiss Liquid Fund | 6.833% | 4.731% | 5.366% |
| Category Average | 5.909% | 4.009% | 4.787% |
| CRISIL Liquid Fund Index PR | 6.841% | 4.869% | 5.486% |
How Arbitrage Funds did in August 2023
Top performers (Growth Option – Direct Plan) on 5-year returns (as on 31st Aug-23):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
| Edelweiss Equity Arbitrage | 7.483% | 5.481% | 5.923% |
| Nippon Arbitrage Fund | 7.411% | 5.406% | 5.876% |
| Invesco Arbitrage Fund | 7.842% | 5.600% | 5.848% |
| Category Average | 6.713% | 4.672% | 5.049% |
| Benchmark Index | N.A. | N.A. | N.A. |
One quick thing one can read from the tables is that while performance may have fluctuated for bond and hybrid funds over one year, they are largely stable over 3 and 5 years.
What we read from the Non-Equity Fund rankings
In the above analysis, we have looked at non-equity funds at 3 levels. At the first level we have looked at 3 major hybrid funds viz. the aggressive allocation funds, conservative allocation funds and the dynamic allocation funds or Balanced Advantage Funds. Under the debt fund category, we look at government and corporate debt funds from a longer term perspective. Lastly, we also look at two key treasury products viz. liquid funds and arbitrage funds. What exactly are the takeaways?
Debt funds have given lower returns on a 1-year basis in August 2023 compared to the previous month. However, this can be attributed more to the fund NAVs being highly volatile during the month. This has apparently impacted the trading yields on bonds. That, in turn, has impacted bond returns and the impact is more visible in short term returns. While bond yields were flat, it was the volatility that hit debt fund returns. However, longer period returns over 3 year and 5 years are broadly consistent.
An interesting point emerges from the analysis of the above mutual fund rankings across the hybrid and debt categories. The top ranking funds across hybrid and debt categories have been largely consistent over the past few months on rolling basis. What exactly does this indicate? For starters, it shows that past returns in most mutual fund categories are a fairly reliable and potent indicator of future performance. You can actually use the past performance as an index of how it will perform in the future, with a reasonable level of confidence. That is significant from an investor perspective and also from an advisory perspective, as it makes fund selection a lot more data driven.
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