Should you invest in Edelweiss MF Nifty Alpha Low Volatility 30 Index Fund?

Edelweiss Mutual Fund has recently launched the Nifty Alpha Low Volatility 30 Index Fund. Subscriptions for the New Fund Offer (NFO) are open until May 10.

This multi-factor index fund comprises 30 stocks chosen from the top 150 listed stocks. "These stocks have shown recent performance superior to the broader market and exhibit lower volatility," according to Edelweiss AMC.

Who should choose this fund?

Investors aiming for long-term capital growth and prefer a passive approach to equity and equity-related investments that reflect the Nifty Alpha Low Volatility 30 Index might find this fund appealing. The fund holds a "very high" risk rating on its riskometer.

With the introduction of this equity index fund, we strengthen Edelweiss AMC's offerings in the equity passive fund sector," said Radhika Gupta, MD & CEO of Edelweiss Mutual Fund.

"This fund is perfect for investors wanting a large-cap strategy that potentially outperforms the broader market, combining Alpha and Low-Volatility factors to enhance returns while controlling risk," she said.

Risk factors to consider

Passive investments make up at least 95% of the fund's assets, linking closely to the securities of its benchmark index. "This passive strategy may expose the fund to market downturns linked to the securities in the underlying index," says brokerage firm Angel One.

Tracking errors and differences are also risks, indicating potential variances between the fund’s performance and that of the Nifty Alpha Low Volatility 30 Index. "These risks, while standard in index funds, mean the fund's returns could differ from the index it tracks," the brokerage added.

What Is a New Fund Offer (NFO)?

Investment companies and mutual funds come up with NFOs when they launch a new fund with the aim of raising fresh capital for purchasing securities or when they wish to capitalise on a potential opportunity. For instance, when the interest rate regime turned upwards earlier in 2022, many fund houses began launching NFOs for target maturity funds capable of locking in the relatively higher rates. In an NFO, the initial purchasing offer varies in line with the structuring of the fund, the details of which are clearly mentioned in the NFO document. An NFO could be launched for any and all varieties of schemes, from equity funds and debt funds to passive equity funds, passive debt funds and hybrid funds, enabling investors like Ritika to pick from a horde of options.

Edelweiss MF's 'Nifty Alpha Low Volatility 30 Index Fund’ Explained

The fund predominantly invests (95-100%) in equity and equity-related securities that track the Nifty Alpha Low Volatility 30 Index.

"Since its inception in April 2005, the Nifty Alpha Low Volatility 30 Index has consistently outperformed the Nifty 100 TRI index," noted the mutual fund in a press release. "It has beaten the Nifty 100 TRI index 88% of the time over 5-year rolling returns and 100% over 10-year periods, delivering average excess returns of 5.2% and 5.9% respectively."

Nifty Alpha Low Volatility Index

The Nifty Alpha Low-Volatility 30 Index is carefully constructed to reflect a portfolio blending Alpha and Low Volatility. This mix helps smooth out the swings typically seen in single-factor indexes, offering a more stable investment option through a single index that includes 30 stocks from the Nifty 100 and Nifty Midcap 50. Stocks are selected and weighted based on their Alpha and Low Volatility scores, with a maximum weight of 5% per stock. This index is versatile, used for benchmarking, and supports the creation of index funds, ETFs, and structured products.