The new fund offer is currently open and closes on July 26. Investors can put in a minimum of ₹5,000 and in multiples of ₹1 thereafter with the option of doing systematic investment plans (SIP) starting with ₹500. The fund will be managed by Harish Krishnan and Abhishek Bisen and have an exit load of 0.5% if switched out within 90 days.
Kotak Quant Fund will use a combination of man and machine to select stocks and build its portfolio. From a universe of 800-1,000 stocks, the fund manager will weed out companies with low liquidity, poor quality balance sheets and weak corporate governance to zero in on about 150-200 stocks. Once this is done, the scheme will use its algorithm to choose 35-50 stocks for its portfolio using a mix of momentum, quality and volatility factors. The portfolio will be reviewed once every six months.
Many times fund managers have biases on sectors or stocks, due to which they tend to stick to them, even though they underform. Analysts believe quant funds eliminate these biases and emotions, due to which they merit allocation in portfolios.
“An investor with a high-risk appetite and sufficiently decent understanding of markets and this space, can consider exploring quant investing with a long investment horizon commitment of minimum 3 years. They can allocate 10-15% of the financial assets in a quant fund, after having understood the selection criteria,” says Deepak Jasani, head of retail research, HDFC Securities.
Since the model needs evaluation and conviction from the investor, financial planners believe it works for sophisticated investors only.Although the specific details of models are not laid out; an investor should check whether it considers all relevant parameters – financial, valuation, market sentiments, volumes, allocation & weights, rebalancing, elimination and selection criteria mentioned in the schemes’ document and it should provide confidence about the quality of stocks in the portfolio,” adds Jasani. Due to their different style and differentiated portfolios which are an outcome of algorithms that remove bias, financial planners believe quant funds have a role to play in portfolios . “Quant funds have visibility in style and action, which helps the investor decide the role it will play in his portfolio,” says Nirav Karkera, head of research,Fisdom.Though there are existing funds, in the quant space, the algorithms used to build portfolios are different. They are yet not popular with investors and they have been slow in buying such products, resulting in low assets under management of existing schemes.
