Edelweiss Mutual Fund Files Papers for Nifty Alpha Low Volatility 30 Index Fund

In a recent development, Edelweiss Mutual Fund has filed papers with SEBI for the introduction of a Nifty Alpha Low Volatility 30 index fund, named the Edelweiss Nifty Alpha Low Volatility 30 Index Fund. This open-ended scheme aims to replicate the Nifty Alpha Low Volatility 30 index, providing investors with an opportunity for long-term capital appreciation and passive investment in equity and equity-related securities, mirroring the composition of the index, subject to tracking errors.

Understanding the Nifty Alpha Low Volatility Index

The Nifty Alpha Low-Volatility 30 Index is meticulously crafted to mirror the performance of a portfolio of stocks carefully selected based on a blend of Alpha and Low Volatility. By combining these factors, the index aims to mitigate the cyclicality inherent in single-factor index strategies, offering investors exposure to multiple factors through a single index product. Comprising 30 stocks drawn from the Nifty 100 and Nifty Midcap 50, the index assigns weights to stocks based on Alpha and Low Volatility factor scores, with individual stock weight capped at 5%. Its versatility extends to various applications, including benchmarking, the creation of index funds, ETFs, and structured products.

Risk Factors to Consider

1. Passive Investments: Given that the scheme intends to invest not less than 95% of its net assets in the securities of the benchmark index, it will operate without active management. Consequently, the scheme may be vulnerable to general market declines associated with its underlying index, as it invests in securities based solely on index inclusion, without considering their individual investment merit.
2. Tracking Error and Tracking Difference Risk: Tracking error and tracking difference serve as metrics to gauge the variance in the performance (return) of the Fund’s portfolio compared to that of the Underlying Index. Such discrepancies, inherent in any index fund, may result in returns deviating from the performance of the Nifty Alpha Low Volatility 30 Index or the securities included therein. However, it’s worth noting that the risk parameters of the scheme’s portfolio and the underlying index are expected to align closely.

Subscription Details and Minimum Investments

As per the papers filed with SEBI for the New Fund Offer (NFO), the minimum purchase amount stands at Rs 100, with subsequent investments allowed in multiples of Re.1 thereafter. Additionally, the minimum additional application amount is set at Rs 100, with investments in multiples of Re.1 thereafter. These parameters aim to ensure accessibility and inclusivity for potential investors seeking exposure to this innovative index fund.

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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.