Invest in a smart-beta fund only if you are convinced about strategy

Use market cap index-based funds in your core portfolio and complement them with smart-beta funds in satellite portfolio

Smart-beta (also known as factor-based) funds are gaining traction. New fund offers of five such funds are on at present while offer documents of another three are awaiting the regulator’s approval. The existing funds in this space have garnered assets under management of around Rs 5,000 crore.

What is a smart-beta fund?

In a market cap-based index fund, stocks are selected and weights are assigned to them based on their free float market cap.

In a smart-beta index, stocks are selected on the basis of a factor. “Whenever in an index, stocks are selected on the basis of certain objective, quantitative criteria, rather