The country’s leading fund SBI Mutual Fund has launched Quant Fund. Under this, multi-factor based investment method is adopted for the selection of shares. This scheme will take the help of rules and data based analysis for investment decisions. SBI Quant Fund opened for subscription on December 4.
What does the fund offer?
Quant funds or quantitative mutual funds use quantitative analysis to make investment decisions. SBI Quant Fund uses an in-house multi-factor model to optimize performance across different market cycles, taking into account factors such as momentum, value, quality and growth.
“By combining all key equity factors and keeping in mind the risk/return profile of each factor, the fund aims to deliver maximum risk adjusted returns,” said DP Singh, deputy managing director and joint CEO, SBI Fund Management. As far as stock selection is concerned, the fund invests in top 200 companies in terms of market capital. Based on the framework, the ranking of all the companies out of 200 is decided on the basis of momentum, quality, value and growth factors. Under the momentum metric, the fund will look at the near term and medium term performance of the stock.
What will be the investment strategy?
The investment strategy of SBI Quant will be dynamic and the performance of all 4 factors will be taken into account under the scheme. After this, the weight will be increased or decreased depending on the factor whose performance will be better. Extreme limits for outperformance or underperformance of a particular factor have also been fixed in the framework.
What should investors do?
SBI Quant Fund is defined on the basis of four factors and seeks to bridge the gap between the active mutual fund and passive index tracking space. It is suitable for investors who want to avoid the risks present in active funds. Also, don’t want to migrate to a completely passive index tracking segment. There are 10 existing schemes in the active quant fund category in India. Everyone has different models for selecting and removing shares.