BNP Paribas Asset Management is a part of the BNP Paribas, one of the major international banking groups with a global network across 30+ countries in Europe, America and Asia.

They offer around 15 different mutual fund schemes, including equities, debt and the best BNP Paribas hybrid mutual funds.

Hybrid mutual funds invest in both equities and debt instruments and sometimes money market instruments. A combination of debt and equities offers higher returns than only debt funds, while not being as risky as equity funds. They come in various types to appeal to different risk tolerances and financial objectives.

BN Paribas Mutual Fund offers around 4 different hybrid mutual funds.

Hybrid funds provide a balanced portfolio and steady capital appreciation in the long run. The debt portion fortifies them against downturns, while the equities portion gives decent returns. The best BNP Paribas hybrid mutual funds are ideal for a medium-term maturity period of three to five years.

Hybrid funds usually stick to a fixed mix of stocks and bonds that reflect aggressive with higher equities or conservative with higher fixed-income assets. Aggressive funds have at least 65% of their total assets in equity and equity-related shares. On the other hand, Conservative funds invest 75% to 90% in debt instruments. Balanced funds invest 40% to 60% in either debt or equity-related instruments.

The best BNP Paribas hybrid mutual funds can come in multiple types like multi-asset allocation funds, arbitrage funds, equity savings funds and dynamic asset allocation funds.

Taxability

Here are the taxation norms on hybrid mutual funds.

Long-term Capital Gains Tax: Funds with more than 65% assets allocated to equity instruments are treated as equity funds for taxation purposes. LTCG over Rs.1 lakh on equity components have taxes applicable at 10%. Debt-oriented hybrid funds are taxed at a 20% rate after indexation.

Short-term Capital Gains Tax: The STCG (Short-Term Capital Gains) for equity-oriented funds apply at a rate of 15%. STCG at normal income tax slab applies for debt-oriented funds held for less than three years.

TDS: No TDS gets charged for capital gains from hybrid mutual funds.

Factors to Consider Before Investing

Before investing in hybrid mutual funds, investors need to keep certain things in mind. These are:

Expected returns: Hybrid funds do not offer guaranteed returns, which usually depend on the performance of the equity investments. It is important to examine the portfolio of even the best BNP Paribas hybrid mutual fund to get a good understanding of the risks involved. The returns from an aggressive fund will correlate with equity markets, while conservative funds have stable but lower returns.

Risks involved: Hybrid funds come with fewer risks than equity funds but have less stability than debt funds. The debt instrument portion helps to moderate volatility and creates a steady stream of income that doesn't depend heavily on the market state. If the debt assets are invested in AAA corporate funds and money market instruments, the hybrid fund will generate high interest income in bearish market conditions.

Financial goals: The best BNP Paribas hybrid mutual funds are preferred by investors with the financial goal of getting decent returns with little risk. Risk-averse investors like retirees might try conservative funds to supplement their income needs. On the other hand, new investors might prefer balanced or aggressive funds to get profits without undue risks.

Expense ratio: Hybrid funds charge a certain percentage of the investment as a fee for managing the funds. This is called an expense ratio, and it cannot be higher than 2.25% of the total assets as per SEBI regulations. The top BNP Paribas hybrid mutual funds will have low expense ratios as it seriously impacts the fund returns.

Asset allocation: All hybrid funds typically mix equity and debt classes. Many funds have fixed risk targets, and those will be fulfilled in fixed proportions. The fund manager actively manages which asset category, company stock etc., to invest in and change them according to market conditions. He/she also buys/sells equities and securities to take advantage of changing market conditions. Due to the importance of the fund manager's role, it's a good practice to check their past history and performance.

Time horizon: The best BNP Paribas hybrid mutual funds perform well in a medium time horizon, about 3-5 years. A longer time allows the equity component to make maximum returns in changing market conditions. Medium-term funds are ideal for investors looking for a mixture of modest income, safety and capital appreciation.

Investors need to research the above factors thoroughly to be able to choose the best BNP Paribas hybrid mutual funds 2023.