For investors seeking alternatives to plain equity or debt funds, three categories of hybrid funds are available: arbitrage funds, balanced advantage funds, and hybrid long-short funds launched under SEBI's Specialised Investment Fund (SIF) framework. According to reports from Personal Finance News, while all three combine equity and debt in some form, their strategies, risk profiles, and return potential are very different. SEBI defines arbitrage funds as open-ended schemes investing in arbitrage opportunities with a minimum investment of 65% in equity and equity-related instruments, while balanced advantage funds aim to manage investment in equity/debt dynamically by shifting between equity and debt based on market valuations.
SBI Arbitrage Opportunities Fund leads with an AUM of ₹46,803.09 crore as of July 31, 2026, returning 6.84% in FY2025-26 and 7.83% in FY2024-25. As reported by Personal Finance News, the fund maintains a standard deviation of just 0.07 and beta of 0.69, offering near-zero volatility with consistent 6-8% returns. Edelweiss Arbitrage Fund follows with an AUM of ₹15,139.16 crore, returning 6.77% in FY2025-26 with an identical standard deviation of 0.07 and beta of 0.63.
HDFC Balanced Advantage Fund demonstrates the highest volatility among the three categories with an AUM of ₹1,07,765.65 crore and standard deviation of 0.61. According to Personal Finance News, the fund returned -0.14% in FY2025-26 but delivered 8.40% in FY2024-25 and 40.01% in FY2023-24, reflecting its higher equity exposure. SBI Balanced Advantage Fund shows AUM of ₹42,244.29 crore and standard deviation of 0.46, returning 3.45% in FY2025-26 with a beta of 0.86.
The two hybrid long-short SIFs launched in October 2025 show different performance profiles. As reported by Personal Finance News, SBI Magnum Hybrid Long Short Fund returned -0.39% in its first partial year with since-inception return of 5.79% till August 21, 2026, while Edelweiss Altiva Hybrid Long-Short Fund delivered 1.76% in FY2025-26 and 10.46% since inception, ranking first among 11 funds in its category. Both SIFs require minimum lumpsum investment of ₹10 lakh with low betas of 0.19-0.22, suggesting reduced correlation to broader markets.
For investors with ₹50 lakh to invest, experts recommend a balanced approach combining lump sum investment with systematic transfer plans (STP). According to ETWealth, Ravi Kumar TV, Director at Gaining Ground Investment Services, suggests investing 25-30% of the intended equity amount now and moving the remaining amount gradually through an STP over the next 24 months. This strategy allows money to start participating in the market while reducing anxiety of investing the full amount just before a possible correction. For moderate risk appetite with 7-10 years time horizon, experts recommend 50% in equity funds, 20% in hybrid funds like balanced advantage funds, 20% in high-quality debt or fixed-income investments, and 10% in gold. The equity portion can be spread across flexicap, multicap and midcap/smallcap funds.
