Bajaj Allianz Life introduced the Bajaj Allianz Life Nifty Alpha 50 Index Fund, which will be accessible to customers who currently own or plan to purchase unit-linked insurance products (ULIPs). For those unfamiliar, this is a market-linked index fund designed to replicate the performance of the Nifty Alpha 50 index. This index comprises 50 large-cap stocks known for high alpha (potential for excess returns) and low volatility.
Investors can leverage this new fund to tap into the growth potential of high-alpha stocks, diversify their portfolios, and gain from an index-based investment strategy, all while securing a life cover. This fund operates on a passive management strategy where the fund manager aims to mirror the Nifty Alpha 50 index by investing in its constituent 50 stocks in proportion to their respective weights within the index. The net asset value (NAV) of the fund throughout the New Fund Offer (NFO) period (July 01-15, 2024) stands at ₹10.
Commenting on the launch, Sampath Reddy, Chief Investment Officer, Bajaj Allianz Life Insurance, said, “India’s economic growth story continues to be robust, presenting numerous opportunities for investors. As investors seek to capitalize on this growth journey, they realize the importance of diversifying their portfolios across different market cap segments. The Bajaj Allianz Life Nifty Alpha 50 Index Fund is designed to capture high alpha returns by investing in top-performing stocks across market segments. A historical study of the past four years suggests that the Nifty Alpha 50 Index has been mid-cap and small-cap oriented, as most of the alpha has come from companies in these segments. Over the medium to long term, the Nifty Alpha 50 Index has generated significantly better returns compared to the broader market.”
The Nifty Alpha 50 index focuses on companies that exhibit high alpha scores. It identifies the top 50 large-cap stocks with the highest Jensen Alpha over the previous year, targeting those poised for potential excess returns. For those unfamiliar, the Jensen Alpha (α) quantifies a stock’s performance relative to what the capital asset pricing model (CAPM) anticipates based on its beta (volatility). A positive alpha signifies the stock has surpassed expectations, whereas a negative alpha indicates it has fallen short. Therefore, the Nifty Alpha 50 utilises Jensen Alpha as a methodology to identify high-performing stocks and construct an index that monitors their combined performance.
The Nifty Alpha 50 index has consistently outperformed broader market indices over the medium to long term. It exclusively targets the top 50 companies based on their alpha values. The Bajaj Allianz Life Nifty Alpha 50 Index Fund provides significant advantages by investing in a diversified portfolio of stocks spanning various sectors.
