Tata Nifty200 Alpha 30 Index Fund - A New Chapter in Investing

In the dynamic world of investing, index funds that track alternative indices have become a popular way to potentially gain an edge over traditional market cap weighted indices. Among these alternative indices is the Nifty 200 Alpha 30 Index, which identifies and selects top 30 stocks from the broader Nifty 200 Index, all based on Jensen’s Alpha. Jensen’s Alpha measures the excess return of an investment relative to its risk and highlights stocks that have outperformed the market.

What is Factor Based Investing?

Factors are the characteristics of stocks that can explain their performance, such as size, value, quality, momentum, or in this case, alpha. By investing in a basket of stocks that share a common factor, investors could aim to enhance the returns of their portfolio.

Understanding the Nifty 200 Index

The Nifty 200 Index includes a broad mix of large-cap and mid-cap stocks, offering a comprehensive view of the Indian equity market. It serves as a benchmark that reflects the performance of 200 leading companies across various sectors. From this pool, the Nifty 200 Alpha 30 Index is constructed by selecting 30 stocks with the highest Jensen’s Alpha. 

Introducing the Tata Nifty 200 Alpha 30 Index Fund

Building on this approach, Tata Mutual Fund introduces the Tata Nifty 200 Alpha 30 Index Fund, a new fund that aims to harness this rule-based strategy to help investors achieve potential growth.

How Tata Nifty 200 Alpha 30 Index Fund Differs from Other Index Funds?

1. Alpha-Based Stock Selection: Unlike traditional index funds that select stocks based on market capitalization, the Nifty 200 Alpha 30 Index chooses the top 30 companies from the Nifty 200 based on their Jensen’s alpha scores -measuring performance relative to a benchmark, adjusted for risk. This strategy targets stocks having positive Jensen’s Alpha.
2. Dynamic Stock and Sector Allocation: The fund adjusts its stock and sector weightings based on the index composition. This flexibility allows it to potentially capitalize on emerging opportunities.
3. Broad Market Exposure with a Performance Tilt: The fund provides exposure to large & mid cap stocks, focusing on high-alpha stocks, offering a mix of diversification and performance focus.

Why Invest in the Tata Nifty 200 Alpha 30 Index Fund? 

Tata Nifty 200 Alpha 30 Index Fund is suitable for those seeking potential capital appreciation opportunity with a disciplined, rule-based approach: 

• Potential to Outperform: Top 30 stocks with highest Jensen’s Alpha would be selected to be the part of the index and the fund. 
• Sector Rotation Strategy: The fund gives investors access to various sectors, aiming for growth opportunities.
• Diversification: The fund selects top 30 stocks with positive on Jensen’s Alpha across various sectors and from large & mid cap market capitalizations, aiming to offer a diversified portfolio.

Who Should Invest in the Tata Nifty 200 Alpha 30 Index Fund? 

Tata Nifty 200 Alpha 30 Index Fund could be ideal for:

• Long-Term Investors: Those with a long-term investment horizon who are seeking potential growth.
• Risk-Tolerant Investors: Investors who are fine with ups and downs and have a very high tolerance for risk.
• Diversified Portfolio Seekers: Investors looking to add a unique rule-based investing to their portfolio for enhanced diversification.
• Investors Seeking Alpha: Those interested to invest in a fund which tracks / replicate index that invest in stocks, ranking based on Jensen’s Alpha.

Key Takeaway

Tata Nifty 200 Alpha 30 Index Fund provides the benefits of alpha-based investing with a focus on top 30 stocks, offering potential for growth and diversification. However, investors should be prepared for higher volatility and consider a long-term investment horizon.        

Schema Details

• Scheme Name: Tata Nifty200 Alpha 30 Index Fund
• Investment Objective: The investment objective of the scheme is to provide returns, before expenses, that commensurate with the performance of Nifty200 Alpha 30 Index (TRI), subject to tracking error. There is no assurance or guarantee that the investment objective of the scheme will be achieved. The scheme does not assure or guarantee any returns.
• Type of Scheme: An open-ended scheme replicating/tracking Nifty200 Alpha 30 Index (TRI).
• New Fund Offer Price: The units being offered will have a face value of Rs. 10/- per unit.
• Fund Manager: Kapil Menon
• Benchmark: Nifty200 Alpha 30 Index (TRI) 
• Min. Investment Amount: Rs. 5,000/- and in multiples of Re. 1/- thereafter
• Load Structure: 
  • Entry Load: Not Applicable (Pursuant to provision no. 10.4.1.a of SEBI Master Circular on Mutual Fund dated May 19, 2023, no entry load will be charged by the Scheme to the investor)
  • Exit Load: 0.25% of the applicable NAV, if redeemed on or before 15 days from the date of allotment.

This product is suitable for investors who are seeking*:

Scheme Risk-O-Meter

Benchmark Risk-O-Meter

• Long Term Capital Appreciation
• Investment in equity and equity related instruments comprising of Nifty200 Alpha 30 Index.

*Investors should consult their financial advisors if in doubt about whether the product is suitable for them.

(The above product labelling assigned during NFO is based on internal assessment of the scheme characteristics or model portfolio and the same may vary post NFO when the actual investments are made. The same shall be updated as per provision no. 17.4.1.i of SEBI Master Circular on Mutual Fund dated 27.06.2024, on Product labelling in mutual fund schemes on ongoing basis.)

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.