Generating index-beating returns, or alpha, is random, and an investor should focus on capturing market returns in a low-cost way and beat inflation, Angel One AMC chief executive Hemen Bhatia told FE.
“Alpha has got the shelf life of an unrefrigerated fish,” he said, advising investors to divide the portfolio into core and satellite. Core should ideally be market returns and satellite could be anything including active funds, PMS, or stock picking. “If you can capture alpha sometimes, it is going to be random.”
Angel One only aims to offer passive products, Bhatia said.
The company will be the second passive-only asset management company after Zerodha. He said fund houses having both active and passive will obviously not highlight the benefits of passive products due to less expense ratio. “You have to keep educating the investor why it is challenging to do stock picking,” Bhatia said.
The company has five funds across two asset classes – equity and fixed income. “We will be launching a few smart beta products in coming months,” he said.
“The core is given by us and we also give the satellite. If an investor wants to construct a passive-only portfolio, she has all the ingredients to do so,” Bhatia said.