Zerodha Educate Podcast: Masterclass on factor investing (smart beta) with Sankaranarayanan Krishnan

[raoawesome]

I don’t understand one thing here. Why smart beta funds and quant funds don’t outperform the index?

@Parth111

• makes no sense to invest in active largecap funds anymore. Investors are better off investing in either Nifty 50/Sensex or Nifty 100 index funds or ETFs. The reason is because after the scheme recategorization, SEBI clearly defined the universe for large, mid and smallcap funds. Largecap funds can only invest in the top 100 stocks by marketcap, so it’s very very hard to generate any meaningful alpha.
• Some active funds will always beat the benchmarks, and you’ll only know this in hindsight. It’s very, very hard to identify funds/managers that will beat the benchmark in advance. This is the key reason why index funds and ETFs make a lot of sense.