SBI Mutual Fund has announced the launch of its smart beta offering called SBI - ETF Quality, an open-ended scheme tracking Nifty 200 Quality 30 index.
Unlike regular ETFs, which merely mimic a particular index, smart beta ETFs try to generate higher returns than ETFs within the framework of passive management. This is a relatively new category in the Indian ETF landscape. Such products are one of the fastest growing categories in the international markets.
Typically, smart beta ETFs follow quant-based models that are designed to assign weights to securities in an index based on objective parameters. They apply a series of objective and rules-based screens to the index and companies are then ranked and weighted based on these specific factors.
The scheme aims to provide returns that closely correspond to the total returns of the securities as represented by the underlying index, subject to tracking error. The scheme would invest up to a minimum of 95 per cent in the companies under NIFTY200 Quality 30 ranked by the ‘quality scores’ while the residual 5% will be invested in money market instruments.
The NFO opens for subscription on November 26, 2018 and closes on December 3, 2018.
In a press release, Ashwani Bhatia, MD & CEO said, ‘With the launch of our first smart beta strategy, we will provide an opportunity for retail investors to benefit from long term capital appreciation by investing in quality stocks. The product offers investors an extremely cost-effective alternative to building their portfolios.’’
Navneet Munot, CFA – Chief Investment Officer said, ‘The fund will invest in the underlying index, NIFTY 200 Quality 30, which includes top 30 companies from its parent NIFTY 200 Index selected based on their quality scores. The quality score for each company is determined on 3 factors - profitability, leverage and earnings growth variability.’’
The fund manager for this scheme will be Raviprakash Sharma, who is a CA and charter holder from CFA Institute, USA.
