Listen to this article
An investor education & awareness initiative by Mirae Asset Mutual Fund
In its newly launched investor education and awareness initiative called Passively Active, Mirae Asset Mutual Fund simplifies the concept of Passive Funds in India.
In the first few articles of the new series, the fund house will take us through factor funds or smart beta funds. Smart beta investing is selecting stocks based on pre-defined factors like alpha, volatility, quality and so on , as defined in the underlying index methodology. By being rule bases, these funds aim to outperform broad based indices within the framework of passive management .
In this article, the fund house helps us understand the concept of Alpha funds
What are alpha funds?
- Get an exposure to top performing stocks of India
- No sector or size bias. Stocks can be picked across sectors and sizes
- These funds tend to outperform other factor specially in a trending market (upward or downward trend)
- Cost effective way to generate alpha like active funds
- Rule based framework makes it purely objective
What are the risks involved?
- Risk of volatility comes with all equity investments. Same holds true for alpha funds
- It tends to underperform in a range bound market
- Unlike broad based indices, alpha smart-beta strategy is not sector agnostic so performance may be cyclical
- Pure focus on past one year returns to select stocks
What is the utility of this fund?
- You can use these funds to achieve long term goals
- These funds may give your investment portfolio an edge
- Hedge your risk of underperformance of actively managed funds
- Helps in reducing the overall portfolio cost
- Can be a part of your satellite allocation
Past performance report
Here is the past performance of alpha index over broad based index
As you can see, all the alpha strategies – Nifty Alpha 50 Index, Nifty 100 Alpha 30 Index and Nifty 200 Alpha Index have outperformed their respective broad market index- Nifty 50 Index, Nifty 100 Index, and Nifty 200 Index across 1, 3 and 5 years as on June 2024.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Conclusion
- Stocks having high alpha score tends to outperform
- Especially in a trending market (upward and downward) like India, alpha strategy has done well historically in the long term especially in the bull markets
An Investor Education and Awareness Initiative by Mirae Asset Mutual Fund.
All Mutual Fund investors have to go through a one-time KYC (Know Your Customer) process. Investors should deal only with Registered Mutual Funds (RMF). For further information on KYC, RMFs and procedure to lodge a complaint in case of any grievance, you may refer the Knowledge Center section available on the website of Mirae Asset Mutual Fund.
The information contained herein is compiled from third party and publicly available sources and is included for general information purposes only. Views expressed here cannot be construed to be a decision to invest. The statements contained herein are based on current views and involve known and unknown risks and uncertainties. Whilst Mirae Asset Investment Managers (India) Private Limited (the AMC) shall have no responsibility/liability whatso- ever for the accuracy or any use or reliance thereof of such information. The AMC, its associate or sponsors or group companies, its Directors or employees accepts no liability for any loss or damage of any kind resulting out of the use of this content. The recipient(s) before acting on any information herein should make his/her/their own investigation and seek appropriate professional advice and shall alone be fully responsible / liable for any decision taken on the basis of information contained herein. Any reliance on the accuracy or use of such information shall be done only after consultation to the financial consultant to understand the specific legal, tax or financial implications.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
