Why smart-beta funds should be a part of your satellite portfolio

These products, however, carry higher risk than a pure passive fund

The new fund offer (NFO) of ICICI Prudential’s Alpha Low Volatility 30 Exchange Traded Fund (ETF) is on at present. This ETF belongs to an emerging category that is referred to as factor-based or smart-beta investing. Several such ETFs and index funds exist already, based on themes like quality, low volatility, value, equal weight, and so on. 

Most of these products have a three-year track record (only a couple have been around for five years). Over this period, while most have outperformed the Nifty Total Return Index (TRI), one has lagged behind (see table). Going by performance so far, investors should