ICICI MF recently filed for an ETF that will track the Nifty Alpha Low-Volatility 30 Index. It is part of the suite of smart-beta indices with the NSE, with the portfolio designed using a combination of two factors.
Mutual funds (MFs) are looking at launching low-volatility products - equity, as well as hybrid - to give investors alternatives in the current market environment.
ICICI MF recently filed for an exchange-traded fund (ETF) that will track the Nifty Alpha Low-Volatility 30 Index.
It is part of the suite of smart-beta indices with the NSE, with the portfolio designed using a combination of two factors.
As much as 50 per cent of the index portfolio is oriented towards low-volatility stocks on the Nifty, and the rest are oriented towards the alpha component.
The index consists of 30 stocks that meet the low-volatility and alpha criteria.
Stocks in the Nifty 100 and the Nifty Midcap 50 (at the time of review) are eligible for inclusion in the index.
“The ‘alpha’ factor enables selection and assigning a weighting to the stocks which have performed well on a relative basis.
"The index has a stock level capping of 5 per cent and is rebalanced periodically which normally helps assign a higher weighting to stocks/sectors that are doing well,” said Chintan Haria, head-product development and strategy at ICICI MF.
“The other factor i.e. ‘low-volatility’ endeavours to limit downside and provide portfolio stability,” he said.
In year-to-date, the Nifty Alpha Low-Volatility 30 Index has given negative returns of 14.6 per cent.
At the same time, the Nifty is down over 21 per cent.
Among other fund houses, Axis MF has filed for a capital protection-oriented fund series.
The capital protection fund, as the name suggests, seeks to safeguard investors’ capital.
It is a close-end hybrid fund with portfolio skewed towards debt to achieve the scheme objective.
The maturity of the debt portfolio is typically aligned to the lock-in period of the fund.
Analysts say as debt papers tend to be held to maturity, the chances of mark-to-market losses because of interest-rate fluctuations are mitigated.
“However, investors need to be aware that these are close-end products with a lock-in period,” said an MF analyst.
The capital protection fund can invest between 70-100 per cent in the debt portfolio and invest as much as 30 per cent in equity products.
PGIM MF also plans to launch a balanced advantage fund (BAF).
While the fund house had the plans before Covid-19-triggered volatility, it expects the product to gain traction in the current environment.
BAFs are dynamically-managed equity mutual funds that typically alter their equity allocation between 30 per cent and 80 per cent, depending on market valuations, usually considering the price-earnings ratio.
