Here's something we've observed across hundreds of investor portfolios, ours included. The typical PMS investor has 90-100% of their managed money in equity. For someone with a 10-year horizon and the temperament to sit through a 30% drawdown without flinching, that might still work. But not every investor has that temperament. And not every rupee in your portfolio has a 10-year horizon.

Some money is earmarked for a child's college admission in 2029. A property purchase in 2028. A planned early retirement in 2031. These goals can't absorb a 25% drawdown 18 months before the money is needed. Pure equity is too volatile for them. And since April 2023, debt is taxed at your income slab rate and with no indexation benefit. For anyone in the 30%+ bracket, the most obvious low-volatility option just became significantly less attractive.

So you're left with a gap. You need a lower-volatility allocation that is also tax efficient. You also need it inside a managed structure, not as an afterthought parked in a liquid fund or FD. And you need it to actually deliver reasonable post-tax returns rather than just preserving capital in nominal terms.

Anchor is built for that gap. It's a low-volatility, rules-based basket of hybrid mutual funds that sits inside your Capitalmind PMS. Designed for investors who want a smoother ride, a tax-efficient path for non-equity allocation, and a credible investment strategy for goals that are ~3 years away.

What Anchor Actually Is

Let's get specific.

Anchor is an investment approach within Capitalmind PMS, which holds 4-6 hybrid mutual fund schemes (and eventually hybrid SIFs, once those have a credible track record). It targets a 50:50 split between equity and non-equity exposure. Because the underlying hybrid funds use arbitrage and hedged positions to maintain 65%+ gross equity, the funds can individually qualify for the 12.5% LTCG equity taxation depending on their holding period.

The net equity exposure, the part actually taking directional market risk, sits in the 30-45% range. The rest is debt, arbitrage, commodities, and cash equivalents. So with roughly half the equity risk, you get the tax treatment of 100% equity. That's the structural edge.

How the Strategy is Built: The CALM Process

We've called the framework CALM, which is either a clever backronym or an aspirational one, depending on how you look at it. However, we do think it describes what the basket is supposed to do for your portfolio.

Category peer-relative screens. Each hybrid fund is evaluated within its own category. An Equity Savings fund is compared to other Equity Savings funds, not to an Aggressive Hybrid.

Age filter. The fund must have at least a 3-year track record. No new launches, no untested strategies. We want to see how the fund behaved through at least one market cycle.

Low-volatility and consistency scoring. This is the quantitative shortlisting step. The model ranks funds on risk-adjusted returns, volatility relative to peers, and drawdown control. The emphasis is on consistency, not on who had the best single year.

Manager overlay. From the shortlisted set, the fund manager picks the final scheme per category using informed discretion. This is the human layer on top of the quantitative process. It accounts for things the model can't capture easily: changes in fund management teams, style drift, AUM-related concerns.

The result is one scheme per hybrid category (Equity Savings, Dynamic Asset Allocation, Aggressive Hybrid, Multi Asset) with allocations to target the 50:50 equity/non-equity allocation at inception.

The basket is reviewed annually. If a scheme drops out of the quantitative shortlist during the annual review, it gets replaced. If it stays in the shortlist, it stays in the basket. Rebalancing is tax-aware: we prefer selling once the gains have become long term and they have crossed the  exit-load windows.

No tactical churn. No headline-driven switches. The rules decide.

Why Four Categories, Not One Fund

You might ask why not just pick the best hybrid fund and put everything there.

Two reasons. First, each category does something different. Equity Savings is your most conservative engine, with net equity of 15-40% giving a lift to the stable returns offered by the remaining market neutral arbitrage and debt positions. Dynamic Asset Allocation shifts equity exposure based on market regimes, hedging more when markets look expensive. Multi Asset adds gold and commodities for diversification beyond the equity-debt axis. Aggressive Hybrid gives you 65-80% equity bringing in the directional equity risk and returns with a modest debt buffer.

(Check out the second article in this series for the full breakdown.)

Second, putting everything into one fund means you're entirely dependent on that fund manager's allocation calls. If their model is wrong about the regime, or their timing is off on equity-debt shifts, your whole buffer underperforms. By picking one scheme per category, Anchor runs four distinct engines simultaneously: hedged carry, dynamic allocation, equity-tilt-with-buffer, and multi-asset diversification. When one engine has a bad quarter, the others may still compensate.

This is portfolio construction applied to the buffer itself. We think that's the right level of care for money that's supposed to be the stable part of your portfolio.

What the Backtest Shows (And What It Doesn't)

Before we get into numbers: this is a backtest. Simulated performance from January 2017 to December 2025. Gross of Capitalmind's management fees and transaction costs. It does not represent actual PMS returns. Anchor has been launched in March 2026, so there is no meaningful live track record yet.

Now, with that clearly stated, Rs. 10 invested in the Anchor backtest on January 1, 2017 grew to Rs. 29.56 by December 31, 2025. The benchmark (NIFTY Multi Asset 50:20:20:10) grew to Rs. 27.81 over the same period. Anchor didn't dramatically outperform its benchmark on returns. But that's by design.

Where Anchor pulled ahead is on risk metrics. On a 1-year rolling basis, the backtested Sharpe ratio (excess return per unit of risk; aka volatility) was 0.94 versus 0.77 for the benchmark. Sortino ratio (excess return per unit of downside risk or negative volatility) was 0.86 versus 0.68. A higher Sharpe & Sortino ratio indicates better risk-adjusted performance.

But the real story is in the drawdown chart.

During COVID (March 2020), the Nifty 500 TRI fell over 38%. The Anchor backtest fell materially less. The same held during the NBFC crisis in 2019, the 2022 global slowdown, and the 2024-25 correction driven by FII outflows and trade tensions. Every time the market tested investor nerve, Anchor's drawdowns were shallower than both the benchmark and pure equity.  Enough to change whether an investor picks up the phone to redeem or not.

That's the trade-off. Anchor doesn't give you more return. It aims to deliver similar returns with less pain. And less pain means you're more likely to actually stay invested through the cycle and realize the return at the end. (We keep coming back to this point across the series because it's the one that matters most and gets ignored most often.)

The Tax Math, Briefly

Let's say you're in the 39% tax bracket. You have Rs. 1 crore to allocate to a lower-volatility strategy. Assuming 12% return from equity and 8% from debt before tax,

Option A: Invest 50% each in an equity and debt fund delivering a blended return of 10% before tax. While the equity portion qualifies for LTCG tax at 12.5%, giving you roughly 10.5% post-tax, the debt portion gets taxed at your slab rate. At 39%, that's 4.88% post-tax. This leaves you with a blended post tax return of 7.69%.

Option B: An Anchor-type strategy investing in hybrid mutual funds targeting a similar allocation. Since the underlying funds maintain 65%+ gross equity, the gains qualify for LTCG tax at 12.5% depending upon their holding period. The same blended 10% return before tax would be 8.75% post-tax.

On Rs. 1 crore over 3 years, that's roughly Rs. 3.7 lakh more in your pocket. Over 5 years, it's about Rs. 7.3 lakh. Not because Anchor earned a higher return, but because less of the return went to the tax department.

Same risk. Same underlying allocation. But a meaningful difference in post-tax returns, purely because of how the structure is taxed.

This is why the AUM of hybrid mutual funds in India have ballooned after the 2023 debt tax change. The tax arbitrage is real, it's structural, and it's the reason Anchor considers the taxation structure of each scheme in the basket at the time of fund selection. (If a hybrid fund doesn't qualify for equity tax treatment at the time of fund selection, it doesn't matter how good its risk-adjusted returns are.)

How Anchor Fits in your Portfolio

Some of the ways to use Anchor within Capitalmind PMS:

As the core, for investors who prioritize stability. A 100% Anchor allocation is a conservative, rules-based portfolio with lower upside than pure equity. It's designed for money earmarked for specific goals in the 3-4 year range: a child's college fees, a property purchase, a planned early retirement. The goal isn't to maximize returns. It's to make sure the money is there when you need it, without the anxiety of watching it swing 30% in either direction.

As an anchor (the name isn't accidental) alongside growth strategies. Pair it with Surge India for an alpha-chasing equity sleeve with a low-volatility base. Or with All Weather Equity & Altitude for a diversified exposure to market’s alpha and beta using mutual funds. 

The idea is simple: Anchor can help lower the volatility in your portfolio, achieve your desired asset allocation in the PMS in a tax efficient manner or to create a glide path for your medium term goals. 

The hardest part of equity investing isn't picking stocks or timing entries. It's sitting still during a drawdown when every instinct says do something. Anchor doesn't eliminate equity risk from your portfolio. It gives you a part of your portfolio that isn't asking you to be brave.

This is what we mean by "stay the course." Your equity strategies win the race. Anchor aims to ensure that the speed bumps don't derail you along the way.

Who Anchor is Not For

We don't want to beat around the bush about this either.

If you're looking for equity-like returns and can stomach 25-30% drawdowns without blinking, you may not need Anchor. Your risk tolerance is already suited to a pure equity strategy, and Anchor's lower-volatility profile may feel like a drag on your returns.

If you expect capital guarantees or "predictable" income, Anchor is not that product. Lower risk is not no risk. The underlying funds hold real equity exposure (30-45% net), and in a sharp market correction, the investments will fall. Less than pure equity, but it will fall.

If you're the kind of investor who will pull money out of Anchor to chase the next equity rally, you'll defeat the purpose. The buffer only works if you let it be boring during the good times. And it will be boring during the good times. That's a feature, not a bug.

Anchor is for investors who've learned, sometimes the hard way, that the returns you see are different from the returns you keep. And that depends upon whether you stayed put through the challenging periods in the market. It's for people who want to stop making portfolio decisions under duress.

 

This is the third and final article in our series on making a case for hybrid asset allocation. The first made a case for the need of a buffer. The second unpacked the four hybrid Mutual Fund categories. This one introduces Anchor, our new investment approach within Capitalmind PMS.

 

New investors can reach us at connect@capitalmindwealth.com or connect with our Client Advisory Team. Existing clients can talk to our Relationship Manager or email us at support@capitalmindwealth.com.

Disclaimer: Investing in securities markets involves risk, and no specific returns or performance are guaranteed. This communication is issued by Capitalmind Financial Services Private Limited for informational purposes only and does not constitute investment advice, a research report, or an offer/solicitation to buy or sell any securities or portfolio management services. It is not directed at residents of the United States of America, UAE, Singapore, or any jurisdiction where access without proper registration is restricted. While the information is believed to be reliable, Capitalmind and its affiliates doesn't guarantee its accuracy or completeness, and shall not be liable for any loss arising from reliance on this material. Performance data, where mentioned, is based on past results, shown net of fees unless stated otherwise, annualized for periods exceeding one year, is not verified by SEBI, and should not be considered indicative of future performance. Backtest performance is simulated using model assumptions from January 1, 2017 to December 31, 2025, and is for illustrative purposes only. NAVs used are gross of Capitalmind's management fees and transaction costs. This does not represent actual PMS client returns which may vary due to timing of contributions, market conditions, and other factors. Please exercise independent judgment and seek professional advice before investing. This material is confidential and may not be reproduced or redistributed without prior written consent. Capitalmind provides clients with an option for direct onboarding without the intermediation of persons engaged in distribution services. For further details, please refer to our Disclosure Document at https://www.capitalmind.in/disclosure#disc-pms.