Seeking alpha? Go for factor-based fund, limit exposure to 15-20%

While single-factor funds may underperformance at times, a multi-factor one could offer smoother experience

Many mutual fund houses have launched factor-based funds, also known as smart-beta funds, over the past couple of years. The recent new fund offer of UTI Nifty 500 Momentum 30 Index Fund belongs to this category. Various factors based on which funds are available include value, alpha, quality, growth, momentum, and volatility. While many of these funds are based on a single factor, others combine two or more factors.

“Factor investing involves looking at the underlying persistent drivers of returns. Each factor tends to perform in a particular market environment. Investing in a factor-based fund can be beneficial provided you