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UTI MF’s new multi factor smart beta index fund which combines alpha and low volatility factors can be a strong core portfolio candidate as the index has outperformed Nifty 50 in bull, bear and range bound markets and has delivered superior risk adjusted returns compared to Nifty 50 as well as all individual factor-based indices.
A counter-intuitive approach of seeking stocks that do well across both seemingly opposite parameters – alpha generation as well as low volatility throws up an interesting mix of 30 stocks which is very different in portfolio construct compared to market indices.
The current portfolio has healthcare and auto as its largest weights (18% each), followed by FMCG at 17% and financials at 13%. IT does not find representation in the current mix.
With portfolio rebalancing scheduled every June and December, it is reasonable to presume that in the December rebalancing, we may see IT coming in and perhaps financials weight getting increased – based on alpha trends in recent months. Rebalancing every six months ensures that durable trend changes are caught reasonably early.
Good analogy. Construct of the fund: Two batsmen with different styles batting from either end. Rebalancing done every 6 months as companies declare results quarterly & it’s better to watch for 2 quarters before rebalancing. Midcaps have performed better than large & small caps is the observation.
