The fund will monitor the Nifty200 Momentum 30 index, however it’s completely different from a conventional passive index scheme. Such methods attempt to outperform the benchmark index. On this scheme, shares will probably be chosen primarily based on their momentum rating, which is set primarily based on its six- and 12-month worth returns, after adjusting for its every day worth volatility. Inventory weights are primarily based on a mix of the inventory’s normalised momentum rating and its free-float market capitalisation. Particular person inventory publicity will probably be capped at 5%. “It is a rule-based quant fund and such methods work properly over the long run. Nevertheless, it carries larger danger and ought to be handled it like a midcap fund,” says Vijay Kuppa, founder, Orowealth.
Wealth managers stated momentum is aggressive funding fashion and carries larger danger and the fund may see interval of relative underperformance if there’s a sharp change in market cycles or when there’s sharp restoration or drop. UTI stated that the index has underperformed Nifty200 Index solely three out of 16 calendar years on this technique, as proven by again check outcomes.
Whereas there’s a 5% cap on particular person inventory weight, there is no such thing as a sectoral cap, exposing an investor to that danger. Monetary planners really feel that first-time buyers mustn’t put money into it merely as a result of the associated fee is low. “Quant methods are sometimes meant for classy buyers. First-time buyers are higher off with diversified fairness mutual funds and will keep away from this fund,” says Vineet Nanda, founder, Sift Capital.