From hybrid funds to smart beta: Key mutual fund trends to watch in 2025

As the mutual fund landscape evolves, 2025 is set to bring shifts in investor preferences and emerging opportunities. Niranjan Avasthi, Senior Vice President and Head of Product, Marketing, and Digital at Edelweiss Mutual Fund, has highlighted key trends shaping the sector and offered insights into what investors can expect in the coming year.

Diversification takes center stage

Over the past few years, midcap, smallcap, and thematic funds have driven inflows, reflecting strong investor interest.

For 2025, Avasthi predicts a shift towards multicap and flexicap funds as investors look for diversified exposure across market segments.

Hybrid funds in focus

In periods of market corrections, hybrid funds such as balanced advantage and aggressive hybrids are expected to gain traction. These funds offer a balanced mix of equity and debt, making them a strategic choice for cautious investors.

Passive funds and smart beta rising

Avasthi highlighted a significant turning point for passive funds, spurred by greater awareness and innovative offerings like smart beta funds, which provide alternative strategies beyond traditional market-cap weighting.

Sectors to watch in 2025

Avasthi is optimistic about technology and internet-focused themes, citing their growth potential.

Meanwhile, sectors like consumption, banking, and insurance could see mean reversion, presenting opportunities for value investors.

Caution on international funds

On global investments, Avasthi advised caution.

Changes in Federal Reserve policies may affect correlations between markets, underscoring the need for careful fund selection to optimize portfolios.

Watch the video for more.

Also Read | Is it time for Indian investors to explore global stocks?

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