Is Samco Active Momentum Fund NFO Worth Investing In?

Samco has launched Active Momentum Fund New Fund Offer. This NFO would open on 15th June and closes on 23rd June, 2023 during initial NFO period. Samco MF says Nifty50 generated 12% annualised returns in last 18 years, however Nifty200 momentum and Nifty Midcal 150 momentum generated 17% to 21% returns. Should you invest in Samco Active Momentum Fund NFO? What are the risk factors you should take into consideration before investing in such funds?

Also Read:  ChatGPT Recommended Mutual Funds to invest in 2023

Samco Active Momentum Fund NFO Issue Details

NFO Period 15th June 2023 to 29th June 2023
Scheme reopens for continuous purchase/sale Subscriptions in this scheme shall be accepted during NFO & be restricted post NFO until further notice.
Minimum Application Amount Rs  5000 and in multiples of Rs  1 thereafter
Minimum SIP ₹500 and in multiples of ₹1/- thereafter
NAV of the fund Rs 10 during NFO period
Entry Load Nil
Exit Load 2% – < 365 days
1% – 365 days to 730 days
Nil – > 730 days
Risk Very High Risk
Benchmark Nifty 500 Index TRI
Fund Manager Mr. Paras Matalia

Investment Strategy of the fund

The investment objective of the scheme is to seek to generate long-term capital appreciation by investing in stocks showing strong momentum. Momentum stocks are such that exhibit positive price momentum – based on the phenomenon that stocks which have performed well in the past relative to other stocks (winners) continue to perform well in the future, and stocks that have performed relatively poorly (losers) continue to perform poorly.

There is no assurance that the investment objective of the Scheme will be realized.

Samco Active Momentum Fund NFO – Why should you invest?

1) Active Momentum Strategy: The fund follows an active investment strategy that aims to identify stocks with momentum characteristics, such as breakouts and price leadership. This approach can potentially generate superior risk-adjusted returns for investors.

2) Real-Time Rebalancing: The fund’s system detects gains or losses of momentum in specific stocks and rebalances the portfolio in real time. This allows for quick adjustments to capture opportunities and manage risks effectively.

3) Hedge Against Anti-Momentum: The scheme includes a hedging mechanism to protect the downside when there is little or no momentum in the markets. This feature can help mitigate losses during periods of market downturns or low momentum.

4) Proven Excess Returns: Historical research from MSCI demonstrates that the momentum factor has been a strong generator of excess returns, outperforming the base index by a significant margin. This suggests that investing in momentum stocks can potentially lead to favorable investment outcomes.

5) Beat Broader Markets: The Nifty500 and Nifty200 Momentum 30 indices from NSE (India) have historically outperformed broader markets and their respective base indices by a substantial margin. This indicates the potential for the Samco Active Momentum Fund to outperform the market.

6) Active Investing Advantages: Active investing, as implemented by the fund, offers several advantages over passive investing. These include exposure only during momentum periods, the use of both relative and absolute momentum, flexibility in capital and position sizing, and the ability to invest across different market capitalizations. These factors contribute to the fund’s potential for generating higher returns.

Risk/Negative Factors of Investing in Samco Active Momentum Fund

1) Restricted Subscriptions: The subscriptions for the Samco Active Momentum Fund are accepted only during the New Fund Offer (NFO) period and are restricted after NFO period till further notice. This limitation could hinder potential investors who wish to invest in the fund at a later time and also no fresh funds available for such funds to invest during market falls.

2) Limited Universe: The proprietary momentum-seeking algorithm of the fund scans a universe of 750 stocks, including MicroCaps, to identify stocks with momentum. While this may offer a diverse selection, the limited universe could potentially restrict the fund’s investment opportunities compared to funds with a broader investment universe.

3) Exit Load Charges: The fund imposes high exit load charges for redemptions or switches made within a specific time frame. This fee structure may discourage investors who need liquidity or wish to make changes to their investment holdings within the defined period.

4) High Risk: The Risk-o-meter associated with the Samco Active Momentum Fund indicates that the principal investment is subject to very high risk. Investors should be aware of the potential for significant fluctuations in the value of their investment and the possibility of incurring substantial losses.

5) Past Performance may not repeat: The past returns are not indicative of future returns.

6) Uncertainty of Future Returns: While scheme indicates that there is the potential for the momentum factor to generate excess returns, it does not provide any guarantees. The performance of the fund can be influenced by various market factors and may not consistently replicate past performance or beat the benchmark index in the future.

Performance of existing mutual funds in this category

Currently there is no single mutual fund in this category.

Also Read: Best Mutual Funds to create Rs 100 Crores with 50K SIP

Samco Active Momentum Fund NFO – Should you invest or avoid?

The fund offers several positive factors, such as the aim to generate superior risk-adjusted returns through a momentum-seeking algorithm and the historical success of momentum factors in generating excess returns. Additionally, the fund’s strategy of real-time rebalancing and hedging in anti-momentum situations can be advantageous.

However, there are some negative factors to consider, including restricted subscriptions during and post-NFO, limited investment universe, exit load charges, high risk as indicated by the Risk-o-meter, and the uncertainty of future returns. High risk investors can invest in Samco Active Momentum Fund for medium to long term.

Data Source: Samco Active Momentum Fund SID

Have you liked our tips and analysis? Then share it on your Facebook, Twitter, Telegram and other social media which might be useful to your friends too.

Leave a Reply

Your email address will not be published. Required fields are marked *