Nippon India vs SBI Hybrid Funds: 2 NFOs, 5 key differences investors should know before investing

Two new hybrid-oriented mutual fund offerings from Nippon India Mutual Fund and SBI Mutual Fund are taking different approaches to combining income generation and growth. While Nippon India Income Plus Arbitrage Omni Fund of Fund will blend debt-oriented schemes with arbitrage, SBI Balanced Hybrid Fund will invest directly across equity and debt, without arbitrage exposure.

Here are five key differences investors should know before considering either NFO.

1. Different investment strategies

Nippon India’s Income Plus Arbitrage Omni Fund of Fund will invest 95-100% of its assets in domestic arbitrage schemes and active and passive debt-oriented mutual fund schemes. The remaining 0-5% can be invested in debt and money market instruments.

SBI Balanced Hybrid Fund, in contrast, will allocate 40-60% to equity and equity-related instruments and 40-60% to debt securities and money market instruments. The scheme does not permit arbitrage.

2. Different risk-return approach

Nippon India’s structure combines the income-oriented characteristics of debt investments with an arbitrage strategy through an FoF structure. It is positioned for investors seeking relatively better risk-adjusted returns with an investment horizon of at least two years.

SBI’s balanced hybrid structure takes a more conventional equity-plus-debt approach. Its returns will therefore depend on the performance of both equity and fixed-income investments and the fund manager’s asset allocation.

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3. Underlying funds vs direct securities

Nippon India’s fund will invest primarily in units of other mutual fund schemes, with fund managers selecting and allocating money across active debt, passive debt and arbitrage schemes.

SBI Balanced Hybrid Fund will invest directly in equity, equity-related instruments, debt securities, securitised debt, debt derivatives and money market instruments. It may also invest in overseas securities and ETFs, subject to the stated limits.

4. Different minimum investment and exit-load structures

Nippon India’s NFO has a minimum investment of ₹500, with subsequent investments from ₹100. There is no exit load.

SBI’s NFO requires a minimum application of ₹5,000. For redemptions within one year, an exit load of 1% applies to units redeemed or switched out beyond 10% of the units purchased or switched in. The exit load is nil after one year.

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5. Different benchmarks and tax positioning

Nippon India’s fund will be benchmarked against a combination of 60% CRISIL Short Term Bond Index and 40% Nifty 50 Arbitrage Index. The scheme material also highlights potential long-term capital gains taxation at 12.5% after more than 24 months if the applicable conditions are met, including the specified debt exposure remaining below 65%.

SBI Balanced Hybrid Fund will use the Nifty 50 Hybrid Composite Debt 50:50 Index as its benchmark. Its stated structure is focused on balancing equity and debt exposure rather than combining debt with arbitrage.

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The two NFOs therefore cater to different portfolio preferences. Nippon India offers a fund-of-fund structure combining debt and arbitrage, while SBI offers a more traditional equity-debt allocation. Investors should assess asset allocation, risk, taxation, investment horizon and costs before investing, rather than choosing an NFO solely on the basis of its launch or brand. The NFO dates also differ: Nippon India opens August 17 and closes August 31, while SBI closes on August 24.