Factor Investing: Bridging Active and Passive Investing
Key Takeaway: Factor Investing aims to deliver superior risk-adjusted returns by selecting stocks based on specific attributes, providing a balanced approach to investing.
Understanding Factor Investing
Factor Investing targets specific characteristics (factors) in stocks to potentially enhance returns and reduce risk. Here are the six most common factors used in investment strategies:
Low Volatility
Stocks with stable prices and fewer fluctuations
Alpha
Stocks that have outperformed the index
Quality
Stocks with strong financial health and low debt
Momentum
Stocks that have shown recent strong performance
Value
Stocks trading below their intrinsic value
Size
Stocks with lower market capitalisation
What is Multi-Factor Investing?
- Single-Factor Portfolios: Focus on specific traits like Value or Momentum but short-term returns can be unpredictable as factors fluctuate with market cycles.
- Multi-Factor Strategy: Blends factors like Alpha, Low Volatility, Value, Momentum, and Quality to reduce risks and reliance on a single factor.
- Key Advantage: Aims for higher risk-adjusted returns across market cycles.
Introducing Bandhan Nifty Alpha Low Volatility 30 Index Fund
- Tracks the Nifty Alpha low volatility 30 index, selecting 30 stocks based on Alpha (potential for higher returns) and Low Volatility (relatively stable performance during market fluctuations).
- Combines Alpha for growth potential and Low Volatility for relative stability, aiming to balance returns across different market conditions.
- Mitigates risks by reducing reliance on any single factor, enhancing the potential for consistent performance.
- Aims to deliver better risk-adjusted returns through a rule-based, passive investment approach.
Bandhan Nifty Alpha Low Volatility 30 Index Fund: The Methodology
The alpha factor is pro-cyclical, aims to drive excess return and
outperform during up-cycle.
The low volatility factor is defensive, aims to drive better risk-adjusted returns and outperform during
down-cycle.
#1 Capture Alpha, Limit Volatility
The strategy selects stocks designed to generate alpha with lower volatility.
#2 Proven Outperformance
The index has consistently outperformed both broad market indices (like Nifty 100) and single-factor indices (Alpha 50, Nifty 100 Low Volatility 30).
#3 Superior Risk-Adjusted Returns
The outperformance comes at lower or similar volatility as compared to broad market indices.
Who Should Consider This Fund?
Suitable for investors with a high-risk appetite who are aiming for wealth creation.
Those looking to diversify and potentially enhance their portfolio with a multi-factor approach.
Investors seeking alpha generation opportunities with relatively lower volatility.
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Make an informed decision. Learn more about investing in Bandhan Nifty Alpha Low Volatility 30 Index Fund
Fund Facts
Type of Scheme
An open‐ended scheme tracking Nifty Alpha Low Volatility 30 Index
NFO Date
08th - 20th January 2025
Benchmark
Nifty Alpha Low Volatility 30 Index
Fund Manager
Mr. Nemish Sheth
Minimum Investment
During New Fund Offer
₹ 1,000
And in multiples of Rs. 1/- thereafter
Exit Load
0.25% - if redeemed on or before 15 days from the allotment date.
Nil - if redeemed after 15 days
from
the allotment date
Plans/Options
Regular/Direct Plan: Growth Option
Investment Objective
The investment objective of the Scheme is to replicate the Nifty Alpha low volatility 30 Index by investing in securities of the Nifty Alpha Low Volatility 30 Index in the same proportion/weightage with an aim to provide returns before expenses that track the total return of the Nifty Alpha Low Volatility 30 Index, subject to tracking errors. However, there is no assurance or guarantee that the objectives of the scheme will be realized and the scheme does not assure or guarantee any returns.
Fund Manager
Nemish Sheth
Vice President – EquitiesBandhan AMC Limited
Mr. Nemish Sheth is a Fund Manager at Bandhan AMC (Erstwhile IDFC AMC) since November 2021. He comes with an experience of over a decade in fund management and Dealing in Equity, Derivatives, and Passive Funds. His prior stint includes Nippon AMC and ICICI Prudential AMC, as Dealer for Equity, Derivative and Passive Funds. Mr. Sheth completed his post-graduation in Management Studies with a specialization in Finance from IES Management College (Mumbai).
Product info
Bandhan Nifty Alpha Low Volatility 30 Index Fund
(An open-ended scheme tracking Nifty Alpha Low Volatility 30 Index)
This product is suitable for investors who are seeking*:
- To create wealth over a long term.
- Investment in equity and equity related instruments belonging to Nifty Alpha Low Volatility 30 Index.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
