Union Mutual Fund has launched its factor-based new fund offer, the Active Momentum Fund, which will invest in stocks showing momentum.
The open-ended equity fund will follow a proprietary quantitative model that has been back-tested for over 15 years to arrive at a 30-60 stock portfolio across the market-caps based on their free float.
The high risk-return factor-based investing is a relatively new concept in India. Some of the prominent factor-based investing include Value, Growth, Low Volatility and Momentum.
As of October, the factor investing category in India consists of 68 schemes with a total asset of ₹36,393 crore. Of this, there are 57 passive factor schemes with an AUM of ₹27,026 crore, while the remaining 11 active factor funds have assets of ₹9,367 crore.
The Union Active Momentum Fund aims to provide investors with a rules-based strategy to invest in stocks that exhibit momentum characteristics. Investments will be made purely on a rule-based mechanical approach, which eliminates emotional biases, ensures flexibility in execution, enables disciplined entry and exit points, and facilitates timely corrective actions .
Monitoring outcomes
Madhu Nair, CEO, Union AMC said the new Momentum Fund marks the foray into the exciting world of factor-based investing.
“Investors with a three to five years should consider this momentum fund to reap the benefit of different market cycles. We continue to remain bullish on equity market, though it may remain volatile in short-term,” he said.
Sanjay Bembalkar, Head Equity, Union MF said being actively managed, the fund manager will monitor the portfolio periodically and will have the liberty to override the model in case of exceptional situations in addition to rebalancing the portfolio at least once a quarter.
This rule-based method helps to decide stocks thus enabling fund managers to implement active strategies while remaining under the passive umbrella, he said.