UTI has launched a multi factor – multi cap smart beta fund– UTI Nifty MidSmall Cap 400 Momentum Quality 100 Index Fund, which is positioned as a smarter way to own mid and small caps in your portfolio.
Mid and small caps have delivered stronger returns than large caps over long periods of time and this trend is likely to continue going forward too.
While a momentum factor based fund that participates in mid and small caps can be a good way to pick winners, Sharwan says the big risk in smaller companies is one of quality – speculative excesses tend to lift very poor quality stocks in this space, which can do longer term damage to portfolios.
By adding a quality factor to momentum, UTI solves this problem, ensuring that the best 50 midcap and best 50 small cap stocks find their way into this portfolio.
Market cap weightage takes care of portfolio liquidity and balance, which results in about 75% of the portfolio being invested in midcaps and 25% in small caps.
This index has significantly outperformed broad market benchmarks over time, which Sharwan says can well be repeated in future as well.
Factor based smart beta funds are growing rapidly in terms of retail investor appetite and are now much bigger than sectoral/thematic index funds which have been around for much longer.
UTI MF has also launched a Manufacturing Index Fund which gives a passive option into the decadal “Make in India” theme which spans multiple sectors and segments.