Smart-beta funds are gradually gaining a foothold in India. Recently, ICICI Prudential Mutual Fund launched its Alpha Low Volatility 30 Exchange Traded Fund (ETF). Several such funds already exist, based on themes like equal weight, quality, low volatility, and so on. These funds have been around for only a short period–only a couple have a five-year track record.
Let us first get a perspective on what led to the development and launch of these funds in the developed markets of the West. As those markets turned more efficient, it became harder for fund managers to beat their benchmarks. Money flowed from actively managed funds (where fund houses typically charge a higher expense ratio) into low-cost passive funds. To stem this flow, fund houses thought of a midway solution—a category of fund where there would be no fund manager but where the choice of the portfolio would not be entirely passive. These funds were priced higher than passive funds but lower than active funds.
Next, let us turn to how a smart-beta index is developed. Suppose that you invest in an index like the S&P BSE 500. In such an index fund, the return you get is akin to that of the entire market (we may call this return beta). But suppose you take this index and fine-tune it, by applying some criteria or filters, which you think will either enhance its return. When you develop an index by doing this, it is called a smart-beta index.
Some of these smart-beta indices are based on a single criterion while some are based on two. The latter are referred to as multiple-factor indexes.
Diese Geschichte stammt aus der September 2020-Ausgabe von Investors India.
Starten Sie Ihre 7-tägige kostenlose Testversion von Magzter GOLD, um auf Tausende kuratierte Premium-Storys sowie über 8.000 Zeitschriften und Zeitungen zuzugreifen.
Bereits Abonnent ? Anmelden
Diese Geschichte stammt aus der September 2020-Ausgabe von Investors India.
Starten Sie Ihre 7-tägige kostenlose Testversion von Magzter GOLD, um auf Tausende kuratierte Premium-Storys sowie über 8.000 Zeitschriften und Zeitungen zuzugreifen.
Bereits Abonnent? Anmelden
5 Steps To Achieve Your Financial Goals
From a beach house, a Jaguar, to traveling the world – there are many things in life that we want to accomplish.
Microbiome: The Invisible Ecosystem Within us that Safeguards our Health
Imagine being able to heal yourself and build immunity against major diseases without relying on heavy medication. It sounds fantastic, right? Who wouldn’t want that? The key to achieving this lies in a fascinating area of research—our microbiome.
Gold ETFs: Attractive option for retail investors to take exposure to yellow metal
With the equity market experiencing volatility in August, investors are increasingly seeking to diversify their portfolios.
The Retail Revolution: How India's Stock Market Got a Makeover by the Common Man
In the annals of India’s financial history, the stock market has long been the playground of the big boys—mutual funds, insurance behemoths, and foreign portfolio investors (FPIs).
Strategies to adopt when the markets are at a high (for new and existing MF investors)
An investor must have a plan in place and, more importantly, stick to it regardless of shifting market conditions.
A Collaboration to keep Health FirstPNUT and IDA come together as One!
You reap what you sow! And if you sow health, you will reap a healthier tomorrow. Following the same lines, Personal Nutrition (PNUT) and Indian Dental Association (IDA) have come together as partners to promote complete health and nutrition for each individual! How things unfolded? Let’s explore.
Making a choice between equity and debt mutual funds for long-term goals
Mutual funds are quickly becoming a preferred investment choice for millennials.
ASK THE EXPERT
From last Financial Year, I have shifted to the new Tax Regime.
Flexi-cap Fund Vs Hybrid Fund
Investors in mutual funds can choose from equity, debt, or hybrid funds, each offering different risk and return profiles. Flexi-cap funds provide diversification across market capitalisations, while hybrid funds balance equity and debt for stable returns.
Neuroplasticity: You Can Teach An 'Old' Brain New Skill
A few decades ago, it was believed that the brain’s structure and functions were entirely dependent on genetics, age, and early childhood experiences.
