Tuesday, November 29, 2022
HomeMutual FundAssessment: UTI S&P BSE Low Volatility Index Fund

Assessment: UTI S&P BSE Low Volatility Index Fund

UTI S&P BSE Low Volatility Index fund is the brand new issue index fund on the town.

Whereas it sounds counter-intuitive, we’ve got seen earlier that much less risky shares are likely to do higher than extra risky shares.

There are lots of Low Volatility Indices.

  1. Nifty Low Volatility Index (picks 50 least risky shares from the NSE-listed shares)
  2. Nifty 100 Low Volatility 30 (picks 30 least risky shares from Nifty 100)
  3. S&P BSE Low Volatility Index (picks 30 least risky shares from S&P BSE LargeMidcap)

Nifty 100 Low Volatility 30 picks from the universe of enormous cap shares, the opposite two indices decide shares from a a lot wider universe of shares.

There may be an ETF by ICICI monitoring Nifty 100 Low Volatility 30 index.

UTI and Motilal Oswal have launched index funds/ETFs monitoring S&P BSE Low Volatility index.

Which Low Volatility Issue Index is the perfect?

I might count on the efficiency to be comparable. Nonetheless, allow us to evaluate.

We evaluate the efficiency (Complete Returns index) from January 31, 2012, till January 31, 2022.

The S&P BSE Low Volatility Index is the perfect performer on all parameters.

Highest CAGR.

Lowest commonplace deviation.

Greater Sharpe ratio and alphas.

Highest 3-year and 5-year common rolling returns.

UTI S&P BSE Low Volatility Index Fund
UTI S&P BSE Low Volatility Index Fund
Motilal Oswal S&P BSE Low Volatility Index Fund
Motilal Oswal S&P BSE Low Volatility ETF

On the volatility entrance, you’ll count on Low Volatility indices to carry out higher than Nifty 50. And the indices don’t disappoint. The drawdowns are decrease too.

Nifty 100 Low Volatility 30 index fund

What concerning the reside knowledge?

Low volatility investing seems good. Nevertheless, not all of that is reside knowledge. Knowledge previous to the launch date is backfitted.

Listed here are the launch dates or varied indices and the efficiency since launch.

As you may see, Nifty 100 Low Volatility 30 and S&P BSE Low Volatility indices have underperformed Nifty 50 since their launch. Whereas these are point-to-point returns, 6 years continues to be a very long time.

You too can have a look at the rolling returns charts (shared earlier within the publish). With the reside knowledge, the strains are a lot nearer to Nifty 50 (in comparison with back-fitted knowledge).

Furthermore, observe these are Complete Return indices. There shall be monitoring error. You’ll be able to count on larger monitoring error in Low volatility indices in comparison with Nifty 50. Even inside low vol indices, I might count on larger monitoring error in Nifty Low Vol 50 and S&P BSE Low Vol index (for the reason that universe of shares is broader).

Now, allow us to concentrate on different efficiency parameters than simply returns (since July 31, 2016- January 31, 2022).

CAGR is decrease than CAGR for Nifty 50. Alpha has come down sharply (in comparison with numbers since Jan 31, 2012). Has virtually halved. Nevertheless, these indices nonetheless ship on their promise of low volatility. Regardless of decrease returns, Sharpe ratio is larger than Nifty 50. Common 3-year rolling returns are larger regardless of decrease CAGR. Decrease drawdowns. Good

I just like the Low Volatility issue. In my view, Low Volatility is the magic potion. Maybe as a result of junk shares (which we’ve got no dearth of) are typically extra risky. And Low volatility filter merely removes such shares.

Nevertheless, we’re demanding traders. Lesser volatility is ok however the place are the higher returns? And if you can not beat Nifty 50 over 5-6 years, the traders will ask questions.

Low Volatility has NOT been an impressive performer (returns), at the very least primarily based on the reside knowledge. Maybe, it delivers higher if you combine low volatility with different components. We’ve got seen that in case of Alpha Low Volatility index and momentum indices.

Among the many Low Volatility indices, S&P BSE Low Volatility index is a high-quality alternative.

Further Hyperlinks

S&P BSE Issue Indices Methodology

S&P BSE Low Volatility Index

Nifty Low Volatility 50 Index

Nifty 100 Low Volatility 30 Index

Nifty Issue Indices Methodology



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