Union Mutual Fund marks its foray into Factor based investing The model has many factors namely historical price performance, volatility of returns, relative strength, liquidity etc. to name a few.
FinTech BizNews Service
Mumbai, November 28, 2024 - Union Mutual Fund announced its entry into Factor Based investing with the launch of its new fund offer - Union Active Momentum Fund (An open-ended equity scheme following momentum theme) that will invest in stocks showing momentum.
The Union Active Momentum Fund, an open-ended equity fund, follows a proprietary quantitative model that has been rigorously back tested for more than 15 years. The model has many factors namely historical price performance, volatility of returns, relative strength, liquidity etc. to name a few.
Momentum investing is one of the factors in a factor-based investing approach. Factor-based investing is a relatively new concept in Indian markets, which are predominantly dominated by actively managed equity funds. It involves targeting specific and quantifiable factors of returns in stock markets, such as Value, Growth, Low Volatility and Momentum. According to industry data, as of October 31, 2024, the factor investing category in India comprises 68 schemes with a total AUM of Rs36,393 crore. Of this, Factor Investing Index Funds/ETFs account for 57 schemes with an AUM of Rs27,026 crore, while Factor Investing Active Funds include 11 schemes with an AUM of Rs9,367 crore.
This fund aims to provide investors with a rules-based strategy to invest in stocks that exhibit momentum characteristics. Investments shall be made purely based 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 through continuous monitoring of outcomes.
Gaurav Chopra, Co-Fund Manager and one of the fund managers to the fund commented “Investor sentiment is one of the guiding forces behind stock price movements. Momentum Investing is a rule-based approach with the goal to work with volatility, buy what is rising and sell when they start losing.”
Sanjay Bembalkar, Head Equity and the other fund manager to the fund commented “Momentum arises from how investors act on information, driving stock prices up and creating momentum, and vice versa.”
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. The fund offers sectoral diversification and quarterly rebalancing, aiming to adapt to changing market conditions while actively monitoring the portfolio to respond to exceptional scenarios when needed.
Madhu Nair, CEO, Union AMC remarked “Our promoter group Daiichi Holdings has a wholly owned subsidiary Vertex Investment Solutions reflecting the growing interest in rule based active investing. Union Active Momentum Fund marks our inaugural foray into this exciting world of Factor based investing. We are bullish on this category and believe Smart Beta strategies like Active momentum will have larger role to play in Indian equity markets.”
