Context:
The Indian mutual fund industry is witnessing a shift in factor-based investing — from predominantly passive strategies to increasingly active factor fund offerings. With multiple new fund launches and growing investor interest, the active quant investing trend is gaining ground in 2025.
What Are Factor-Based Funds?
Factor funds build portfolios based on specific investment factors such as:
- Momentum (price or earnings-based trends)
- Quality (profitability, ROE, low debt)
- Value (undervalued stocks)
- Size (smaller companies with growth potential)
- Low Volatility (less price fluctuation)
Traditionally, such strategies were implemented through passive index funds or ETFs. However, a new wave of active fund launches is reshaping the space.
Recent Active Factor Fund Launches (2023–2025)
| Fund House | Fund Type | Launch Status |
|---|---|---|
| ICICI Prudential MF | Active Momentum Fund | NFO open |
| Bandhan MF | Multi-Factor Fund | NFO open |
| Sundaram MF | Multi-Factor Fund | NFO closed (July 2025) |
| Kotak MF | Active Momentum Fund | To be launched (July 2025) |
| Mirae Asset MF | Multi-Factor Fund (FoF route) | Upcoming |
| Samco MF | Active Momentum Fund | Launched in 2023 |
| Union MF, Nippon India, Motilal Oswal | Active Momentum Funds | Launched previously |
| WhiteOak, ICICI Pru | Active Quality Funds | Launched |
| SBI MF | Quant Fund (Multi-Factor) | Ongoing |
Why the Shift from Passive to Active Factor Funds?
Market Dynamics Are Evolving
- Passive factor indices like Nifty 200 Momentum 30, Nifty 200 Quality 30, Nifty 50 Value 20, and Nifty 100 Low Volatility 30 have been tracking performance for over three years.
- However, factor performance cycles shift with:
- Macroeconomic conditions
- Valuation changes
- Investor sentiment
Advantages of Active Factor Strategies
- Dynamic allocation: Switch between factors based on prevailing trends.
- Risk control: More nimble in avoiding underperforming sectors.
- Qualitative filters: Incorporate corporate governance, future outlook, etc.
- Customized factor models: Unlike index-based passive funds.
Example: The ICICI Pru Active Momentum Fund combines price and earnings momentum, unlike passive funds that only consider price.
