Our Hybrid Mutual Fund Rankings Framework

Finding the right balance between risk and reward is the cornerstone of successful investing. For investors, hybrid mutual funds often serve as the "all-weather" solution, offering the growth potential of equities with the stability of debt. However, with hundreds of schemes spanning diverse mandates from aggressive growth to arbitrage; selecting the right fund requires more than just glancing at the past return chart.

At Creso, we believe in empowering our sub-distributors with objective, data-driven insights. Following the Phase I of our Mutual Fund Ranking Framework focused on equity mutual funds, we have extended this to the Hybrid mutual fund category and covered its six major sub-categories viz. Aggressive Hybrid, Conservative Hybrid, Dynamic Asset Allocation (BAF), Multi Asset Allocation, Equity Savings, and Arbitrage in Phase II of our ranking exercise.

The Core Pillars of our Methodology

Our hybrid ranking framework is built on the same three pillars that define our equity rankings, ensuring consistency in how you communicate value to your clients.

1. Fund & Management Quality (~20% Weight)

We believe that the "ingredients" of a fund - its costs and the experience of its pilot - are lead indicators of long-term success.

• Expense Ratio: Lower costs lead to better compounding. We reward funds that maintain competitive expense ratios relative to their category peers.

• Lead Manager Vintage: Hybrid funds require active decision-making, especially in asset allocation. We prioritize funds where the lead manager has a proven track record of navigating different market cycles.

2. Performance Consistency (~35% Weight)

Instead of point-to-point returns which can be misleading due to "recency bias," we focus on Rolling Returns.

• 3-Year & 5-Year Rolling Returns: We evaluate how a fund has performed across multiple entry and exit points. A fund that consistently stays in the top two quartiles of its category is ranked higher than one that fluctuates wildly between top and bottom.

• Relative Performance: We measure a fund’s ability to outperform its specific category benchmark, ensuring that the "alpha" generated is genuine and not just a result of a rising tide lifting all boats.

3. Risk-Reward Efficiency (~45% Weight)

The largest weightage is given to how efficiently a fund manages risk. In the hybrid space, protecting the downside is just as important as capturing the upside.

• Sharpe & Sortino Ratios: These metrics help us understand if the extra returns a fund generates are worth the risk taken. The Sortino ratio is particularly important here as it focuses solely on "bad" volatility (downside risk).

• Standard Deviation: We assess the volatility of the fund's returns to ensure it stays within the expected "comfort zone" of its specific category.

Applying the Framework Across Sub-Categories

While the core pillars remain constant, our framework respects the unique mandates of each hybrid sub-category:

• Aggressive Hybrid: Evaluated with a tilt toward equity performance and risk metrics like capture ratios (upside and downside), as these funds aim for wealth creation.

• Conservative Hybrid: Here, the framework prioritizes low volatility and downside protection, making it a "debt-plus" solution for cautious investors.

• Dynamic Asset Allocation (BAF): We look closely at how well the model-driven asset allocation has managed market peaks and troughs, placing slightly higher emphasis on risk-adjusted returns.

• Multi Asset Allocation: Given they invest in multiple asset classes, we place slightly higher weightage to risk-adjusted returns.

• Arbitrage & Equity Savings: The focus tilts towards expense ratios and return consistency, as these are primarily used for short-to-medium-term liquidity and tax efficiency.

Filters and Eligibility Criteria

To maintain relevance and reliability, the following filters are applied before ranking:

• Minimum fund age requirement of 3-years, ensuring adequate performance history

• Plan-level evaluation - plans are evaluated consistently (regular + growth option), without mixing plan types

• Category-wise ranking, so funds are compared only against true peers

These filters ensure the rankings remain fair, comparable, and actionable.

Scoring and Ranking Process

Each parameter within a pillar is scored on predefined ranges. The weighted scores across all parameters are aggregated to arrive at a final composite score for every fund within its category. Funds are then ranked within their respective equity categories, ensuring no cross-category distortion and apples-to-apples comparison for investors and distributors.

While our ranking framework is derived using a rules-based methodology, the Creso team has reviewed the results and made appropriate tweaks, without overriding the core methodology to ensure consistent and reliable rankings.

Using These Rankings in Client Conversations

I've seen MFDs use fund rankings two ways: defensively (explaining why a lagging but fundamentally good fund, is still worth holding) and proactively (building conviction before recommending a new addition). The Creso hybrid rankings are designed for both.

For portfolio reviews: Instead of defending a BAF fund on returns, you can point to its 5-year rolling return and its Sortino ratio relative to category peers. You're now talking about risk-adjusted performance across multiple market regimes, not just one bad quarter.

For new recommendations: When a client asks why you're recommending HDFC Balanced Advantage over ICICI Prudential Balanced Advantage, you can reference the framework's composite scoring and not just say that "both are good." This is the difference between being a portfolio architect and being a product distributor.

If you're new to the platform, Creso's MFD platform provides these rankings directly inside the dashboard alongside client-ready reports — the same objective scoring you can share across your sub-distributor network without needing to build your own research process.

If you want to access the latest hybrid fund rankings and ready-to-use client-facing reports without building this evaluation process from scratch, Creso's dashboard has the full Phase II rankings live now.