Advisory firms are getting innovative with their offerings. A recent example is ICICI Securities, which has launched a new service called factor-based portfolios.
Factor-based portfolios are stock portfolios with a distinct investment strategy, which are researched and have been known to provide better risk adjusted returns. Because the strategies are well defined and rule based, as well as re-balanced on a specific frequency, they provide investors with a structured approach to stock investing.
Investors will have to cough up an annual fee of Rs8,500 to avail of this service. In addition, they will have to invest a minimum of Rs5 lakh. This indicates that only HNIs investors can enjoy this facility. In mutual fund parlance, an investor who invests Rs5 lakh through lump-sum investment is considered HNI.
The benchmark of factor-based portfolios is MSCI’s risk weighted index methodology and MSCI’s prime value index methodology, said Abhishake Mathur, Senior Vice President ICICI Securities. While risk weighted index methodology is better suited for investors with conservative and moderate risk appetite, prime value index methodology would suit aggressive investors, he added.
Shilpa Kumar, MD & CEO, ICICI Securities said, “We constantly strive to bring innovation in our product suites and offerings. Based on MSCI's well-known index methodology, the equity advised portfolio service on ICICIdirect.com is aimed at giving our 4 million customers a structured way to build their portfolios and benefit from equity investments over the longer term. We believe that retail investors will benefit from these methodologies, which so far were available largely to institutional investors. ”
Elaborating on how the factor-based portfolios will benefit investors, Chandru Badrinarayanan, Executive Director, MSCI APAC, said that MSCI has identified six factors that make a portfolio successful. The index will track these factors and suggest the best risk adjusted portfolio for the investor.
