The SAMCO Asset Management Private Limited has launched SAMCO Active Momentum Fund, which it dubbed as India's first actively managed momentum fund.
Momentum investing takes advantage of price momentum. As such, it capitalizes on trending stocks whose momentum is typically higher than the overall market.
The SAMCO Active Momentum Fund’s new fund offer (NFO) runs from June 15-29, 2023.
The AMC said it will accept subscriptions during the NFO, but it will not reopen like an open-ended scheme after a week.
Further, only Systematic Investment Plans (SIPs) registered during the NFO will be accepted. Post-NFO, there will be restrictions on SIP registrations until further notice, it said.
The face value of each unit during the NFO is Rs. 10, with a minimum application amount of Rs. 5,000 and multiples of Rs. one thereafter. The fund is benchmarked against the Nifty 500 Index TRI.
Why Momentum Investing?
Momentum investing has shown impressive performance over the years, evident from the performance of the momentum indices.
The Nifty 200 Momentum 30 index saw a compound annual growth rate (CAGR) of 17.79 per cent over 18 years, outperforming the broader Nifty 50 and Nifty 500 indices.
Similarly, the Nifty Midcap 150 Momentum 50 index achieved a CAGR of 21.28 per cent since its inception. The MSCI World Momentum Index also delivered a commendable 20x return compared to the MSCI World Index's 10x returns.
Several prominent fund houses have introduced the Nifty 200 Momentum 30 Index Funds, acknowledging the potential of momentum investing. But these are passive funds.
The stocks with momentum characteristics will be selected using a proprietary algorithm, the release said. The fund aims to outperform the market by capitalising on prevailing price trends. According to Umesh Kumar Mehta, the CIO of SAMCO, momentum investing offers advantages like a wider investible universe, quicker rebalancing, and hedging flexibility.
Active Management In Momentum Investing
The fund house claims that with active management, new investments in stocks will be made only during times of momentum, and a hedging strategy is used when there is an anti-momentum. Unlike passive management in which the number of stocks in the portfolio is capped at 50 stocks, there is no fixed cap when a portfolio is actively managed. Also, a wide universe of Nifty 750 stocks is available for actively managed momentum funds.
Who Can Invest?
Investors seeking to employ a momentum investing strategy to achieve long-term capital appreciation can consider the SAMCO Active Momentum Fund. While it can offer advantages during times of economic expansion, investors should approach with caution due to its potential for increased volatility.
As an equity-focused scheme, the fund is classified as "very high risk", and investors must carefully evaluate their financial goals and risk tolerance before investing.
