Smart beta funds are a category of mutual funds that employs metrics such as value, quality, momentum, low volatility, and size to construct portfolios. The index makers select stocks that score high on one or more of the above-mentioned factors to construct these indices. The selection is based on historical performance and wide financial research. Experts say smart beta funds exhibit some characteristics of both active and passive funds.
Smart beta funds are intended to provide higher returns and manage risks more efficiently than traditional index funds. They can also be a bit less expensive than active funds. The index is at the heart of these funds.
Index details
According to the NFO document, the Nifty 200 Value 30 Index has a P/E ratio of 12.71, a P/B ratio of 1.99 and a dividend yield of 2.82. On the other hand, the Nifty 200 index has a P/E ratio of 26.36 and a P/B ratio of 4.53 and a dividend yield of 1.08.
The constituent stocks of this index are ONGC, Grasim Industries, NTPC, BPCL, PFC, IOC, Power Grid Corporation, Coal India, Vedanta, Hindalco. The sectors represented in this index are from financial services, oil, gas & consumable fuels, metals & mining, power, construction materials, chemicals and telecommunications.
Value-based investing the key
“At a time when investors are seeking diversified strategies for long-term growth, value investing remains a crucial component of a well-rounded portfolio. The Nifty200 Value 30 ETF and Index Fund will offer investors a targeted approach to value-based investing, which is designed to provide growth over the long term,” remarked Chintan Haria, principal – investment strategy of ICICI Prudential AMC.
Since the index is constructed with 30 companies from different sectors, the investor gains the advantage of diversification with this investment.
Realign once in 6 months
The index, which is at the heart of these funds, is rebalanced every 6 months to align with market trends and valuation principles. For both NFOs the minimum investment amount is Rs 100 and multiples in Re 1 thereof.
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