Tata Nifty200 Alpha 30 Index Fund launched: Everything you should know

Tata Asset Management Company on Monday launched a new index fund designed to capitalize on the top-performing stocks within the Nifty 200 Index. The Tata Nifty200 Alpha 30 Index Fund concentrates on companies that outperform the market. 

While the fund is actively managed to select top-performing stocks, it follows an index-based approach.

By investing in this fund, investors can potentially benefit from the outperformance of high-alpha stocks within the Nifty 200 index. However, it's essential to consider the fund's expense ratio and long-term performance before making an investment decision.

• The Index’s methodology measures excess return generated by the portfolio relative to its benchmark index Nifty200 after adjusting for risk and volatility. 
• Based on the alpha factor, the fund identifies and includes stocks that generate returns above the broad market return and risk-free return, giving more importance to stocks which generate high excess returns per unit of risk. 
• As a result, Nifty200 Alpha 30 Index has been able to outperform market cap weighted indices like Nifty200 during market upturns. 
• It should be noted that Nifty200 Alpha 30 Index may underperform vis-à-vis Nifty200 during market downturns.

At the launch of the index fund, Anand Vardarajan, Chief Business Officer, Tata Asset Management, said, “This strategy aims to capture extra returns over what Nifty200 index could provide by selecting the top 30 stocks which can deliver alpha.  This is yet another differentiated offering from our side with a view to building our product portfolio. We believe these could add value to clients when it comes to constructing and diversifying their investment portfolio. ”

While sector exposure will change to reflect the outperforming sectors, the index will maintain a stock cap of 5%, which makes the index diversified across sectors and stocks. 

Tata Asset Management Company's (TAMC) Nifty200 Alpha 30 Index Fund is designed to invest in the top 30 stocks from the Nifty 200 index that have exhibited superior performance relative to the benchmark.

Key Features:

• Alpha-Based Selection: The fund's holdings are determined by calculating the Jensen's Alpha of each Nifty 200 constituent. Stocks with the highest alpha values are included in the index.
• Risk Adjustment: The index considers not only alpha but also the volatility of each stock, allocating higher weights to stocks with higher alpha-to-volatility ratios.
• Rebalancing: The index is rebalanced quarterly to reflect changes in stock performance and market conditions.
• Eligibility Criteria: Stocks must have a minimum listing history of one year and be available for trading in the derivatives segment.

Iwho should invest?
Investors looking to participate in the performance of high-performing stocks within the Nifty 200 universe may consider this fund as an option.

Index Methodology:

The Nifty200 Alpha 30 Index methodology measures excess investment return relative to the Benchmark index Nifty200 using 1 year trailing price. Top 30 stocks with highest Jensen’s Alpha are chosen, allocating more weight to stocks which generate high Alpha per unit of risk, i.e., volatility.Index is re-balanced on a quarterly basis using data ending last trading day of February, May, August, and November. The stocks should have a minimum listing history of 1 year as on the cut-off date and should be available for trading in derivative segment (F&O) as on the effective date.

 Here are the  details about the Tata Nifty200 Alpha 30 Index Fund:

• Scheme Name Tata Nifty200 Alpha 30 Index Fund 
• NFO Period 19th August, 2024 to 2nd September, 2024
• Scheme re-opens on or before 11th September, 2024
• 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).
• Fund Manager Kapil Menon
• Benchmark Nifty200 Alpha 30 Index (TRI)
• Min. Application Amount (During NFO) Rs. 5,000/- and in multiple 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.
• Exit load (if any) charged to the unit holders by the Mutual Fund on redemption (including switch-out) of units shall be credited to the scheme net of Goods & Services Tax. Goods & Services Tax on exit load, if any, shall be paid out of the exit load proceeds.