Momentum funds outpace others. Will stellar run last?

Since the launch of first momentum fund in 2021, their number has climbed to 40

- Srushti Vaidya

They were late to the party—but they’re catching up fast. Momentum funds, barely four years old in India, have already overtaken older, more established factor strategies.

Since the launch of the first momentum fund in 2021, the number of momentum-based funds has climbed to 40, surpassing value investing (38 funds) and quality investing (32 funds), which have existed since 1994, according to Value Research.

As of September, value funds stood at 38, while quality funds were at 32, according to data from Value Research.

The reason: a strong run of outperformance by momentum in recent years, which has prompted asset management companies to roll out new momentum funds to capture surging investor interest.

The benchmark BSE 500 Momentum 50 Total Return Index has delivered 34.24% compound annual growth rate (CAGR) returns over the past five years since 2020—beating the BSE 500 Quality 50 Total Return Index and the BSE 500 Total Return Index for value, which returned 23.28% and 20.26% CAGR, respectively. These are point-to-point returns.