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.
This story is from the September 2020 edition of Investors India.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the September 2020 edition of Investors India.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber? Sign In
Are You Drinking Too Much Coffee? If Yes, Then You Are Taking A Big Risk!
Coffee contains caffeine in maximum percentage:
LIC MUTUAL FUND
According to World Bank data, women represent 49.7% of the world population. In India, women represent 48.4% of the population but they contribute only around 18% of the GDP compared to 41% in China.
Maintain 15-20% exposure to US funds in your equity portfolio
2022 was a difficult year for stocks in the United States (US), particularly for the large tech companies known as FANG. Concerns about the Russia-Ukraine conflict, inflation, etc led to a significant drop in their values.
Systematic Investment Plan (Sip): Meaning, Benefits, How It Works
We all dream of buying a car, dream house, gadgets, etc. This all can come to reality if we have strong financial planning. One of the best options is to start investing in mutual funds through a SIP (Systematic Investment Plan).
How to repair your credit score
Fintechs have seen their personal loan portfolios rise at a humongous pace between 2017-18 and 2022-23. However, loans below Rs. 50,000 are showing signs of strain, according to a white paper brought out by Experian and the Digital Lenders' Association of India. If you have defaulted on a loan recently, here are steps you can take to repair your credit score.
Abhaya Here For Her Smile -
Ever wondered why brushing and flossing is so important? Well, it's not just about sparkling white teeth!
The Pathway to Building Wealth: Unlocking Prosperity through Strategic Knowledge and Investment Habits
Mr. Sanjiv Bajaj is the Jt. Chairman & MD, Bajaj Capital, building the platform for the Business leaders of the Financial Services and Advisory sector to exchange their vision, experience, and views on making the right financial decisions.
India's Economic Rise and the $10 Trillion Opportunity
In the last two years, India has been the fastest-growing major economy in the world.
"Consumption is one of the most attractive investment opportunities in India"
Q 1: Your take on the recent Household Consumption Expenditure Survey? Have you observed any great change in urban or rural consumption pattern?
Learn the Magic of Self-Talk There is perpetual self-talk taking place inside all of us
We listen when our self-talk happens in our minds; we listen to whatever is imprinted in our memories and our past conditioning. Many a time we do not hear exactly what the other person is saying, and we form an opinion.