Samco MF garners Rs 409 crore via Active Momentum Fund NFO, restricts fresh investments

As per AMFI data for June month, out of the Rs 8,637 crore net inflows into equity mutual funds, 85 percent came into only midcap and smallcap fund segments.

Asset management company Samco Mutual Fund has collected Rs 409 crore during the new fund offer (NFO) period of its Active Momentum Fund with over 25,000 investors subscribing to the scheme.

The fund house has, meanwhile, restricted fresh investments in the form of lump sum and systematic investment plans (SIPs) until further notice.

The NFO for India’s first active momentum fund -- Samco Active Momentum Fund -- was open from June 15 to June 29.

The quantum of funds collected by the fund house via the scheme is significant as it had average assets under management (AUM) of Rs 815 crore for the June quarter. The AMC is the 37th biggest fund house in the 43-member Indian mutual fund industry.

Notably, Samco MF has four schemes available in the market with flexi-cap being the biggest fund with an AUM of Rs 746 crore as of June end.

Explaining the rationale behind the restriction in investments, Viraj Gandhi, Chief Executive Officer, Samco Mutual Fund said, “There are three 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.”

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According to Gandhi, there has been a lot of momentum in midcap, smallcap and microcap names in which they were looking to have exposure.

“So, we wanted to restrict the fund flows. The reason was that the larger the amount that we get and the smaller the size of the stock is, the more will be the impact that will be created by buying and selling the particular stock. Therefore, these are the technical reasons because of which we have restricted the inflow of funds,” he said.

Notably, as per the Association of Mutual Funds in India (AMFI) data released for June month, out of the Rs 8,637 crore net inflows into equity mutual funds, 85 percent came into only midcap and smallcap fund segments, while largecap funds saw net outflows of Rs 2,050 crore.

Addressing the potential bubble in the broader markets, Gandhi said, “At this point, major indexes are fairly priced. So, getting a lot of momentum in the bigger stocks is going to be a challenge from the current level. There is a lot of action happening in the broader markets in midcap and smallcap spaces, and we also are working on the same philosophy to capture that momentum through our Samco Active Momentum Fund.”

Momentum refers to the tendency of winning stocks to continue to perform well and losing stocks to perform poorly in the near future. In momentum strategy, the stocks are also selected based on their performance in the past with the idea that they will continue to outperform.

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According to the fund house, the Nifty 200 Momentum 30 index has delivered compounded annual growth rate (CAGR) of 17.79 percent over 18 years, outperforming the broader Nifty 50 and Nifty 500 indices.

“Historically, the momentum factor, or the phenomena based on the persistence of stock price trends has been one of the strongest return generators. In Momentum investing, active management offers several unique advantages such as a wider investible universe, quicker rebalancing and hedging flexibility during periods of anti-momentum. By investing in stocks exhibiting momentum characteristics, we aim to offer our investors the potential for superior risk-adjusted returns,” Umesh Kumar Mehta, Chief Investment Officer (CIO), Samco MF, said during the scheme launch.

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The fund manager for Samco Active Momentum Fund is Paras Matalia and the scheme aims to build a portfolio of 50-70 stocks from an investible universe of 750 stocks from large, mid, small and microcaps.

The exit load of the scheme is 2 percent, if redeemed within 365 days.