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Samco Mutual Fund had launched India’s first active momentum fund – Samco Active Momentum Fund. It is an open-ended equity scheme following momentum theme. The fund house during the NFO period which was from June 15 to June 29, 2023 has collected Rs 409 crore with over 25,000 investors subscribing to the scheme.
Recently, the fund house has announced a restriction on fresh investments in the scheme in the form of lump sum and Systematic Investments Plans (SIPs) until further notice.
While explaining the rationale behind the restriction for fresh inflows in the fund, Mr Viraj Gandhi, Chief Executive Officer, Samco Mutual Fund said, “There are few reasons for it. First, we needed to have control of the fund flow, because if you get unlimited flows, momentum as a strategy cannot be deployed properly. Point two, there is an inverse correlation between the fund size and momentum returns. So, the larger the fund, the smaller the returns.”
Simply said, major indices are reasonably valued in the prevailing market conditions, and the fund was hoping to have exposure to the mid-cap, small-cap, and micro-cap area, which has seen significant momentum recently. However, there is an inverse correlation between the fund size and momentum returns. So, the larger the fund, the smaller the returns. The impact of purchasing and selling a particular stock will increase in proportion to the number of stocks that a fund owns and the size of the stock. Therefore, these are the technical reasons because of which the fund house restricted the inflow of funds.
Consequently, now investors will not be able to invest via lump sum and SIP modes in the Samco Active Momentum Fund. However, all existing investments will continue.