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.
Denne historien er fra September 2020-utgaven av Investors India.
Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.
Allerede abonnent ? Logg på
Denne historien er fra September 2020-utgaven av Investors India.
Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.
Allerede abonnent? Logg på
Indians are Developing Weak Bones
In India, 1 out of 8 males and 1 out of 3 females suffer from osteoporosis, making India one of the largest affected countries in the world.
"The strategy behind the Tata India Innovation Fund centers on identifying companies that are driving transformative or incremental changes through innovation"
Yes, we certainly believe innovation is a powerful theme with immense potential for the coming years, and we are excited to bring it to our investors.
What is Hybrid Mutual Fund?
Hybrid Mutual Fund is a combination of more than one type of fund. While they invest in shares of companies listed on the exchange, like equity funds.
Should you invest in dynamic bond funds?
Dynamic bond funds have delivered a category average return of 8.68 per cent over the past year, making them the fourth best-performing category, following long-duration funds, constant maturity gilt funds, and gilt funds. With interest rate cuts yet to begin, these funds remain a viable option for investors seeking to benefit from possible rate reductions.
The Multicap Solution to India's MultiDimensional Growth
India is entering a transformative era of economic growth, backed by a unique combination of demographic strength, infrastructure development, and rising global prominence.
The Long-Term Benefit of Investing in Children's Future
A child is the most treasured part of any parent's life, and naturally, we want to give them the best of what the world has to offer. This often means not only ensuring we can meet their needs but also nurturing them to pursue their unique aspirations. Each child has their own dreams and challenges, making the early years critical as they lay the foundation for a healthy and fulfilling future.
ASK THE EXPERT
Ques. One of my friends told me that your company provides detailed Retirement plans. I want to know what is the procedure to get my Retirement plan. I will be retiring in March 2025. R.P Gupta, Noida
How to Naturally Reverse Fatty Liver Disease
The liver, located on the upper-right side of the abdomen, is the body’s largest internal organ and plays a critical role in detoxifying the blood and processing nutrients.
Banking sector which has underperformed in the last two years, now offers a favorable risk-reward profile
Do you think the market is overpriced? Is yes, should investors refrain from investing in index schemes at the current valuation?
India will continue to enjoy benefits of a close US relationship and trade will continue to grow
Q1. The US elections are said to be one of the closest till date, what impact will the election of a Republican / Democratic party have on the US economy and how is that going to affect India in the short as well as the long term?
