Mutual Fund investment 2020: Want machine, not fund manager to take decisions? Check this

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Updated: January 7, 2020 6:12:33 PM

Unlike actively managed equity funds where the buying and selling decisions are made by the Fund Manager, the Quant Funds select stocks based on quantitative decision-making frameworks.

open-ended equity scheme, equity mutual fund, index funds, actively managed mutual fund, NFO, Quant Fund, Fund Manager, Artificial Intelligence, AI, Machine Learning, MLQuant funds may suit someone looking for an alternative to index funds and actively managed mutual funds.

Tata Mutual Fund has recently come out with an open-ended equity scheme titled Tata Quant Fund. The fund’s investment objective is to generate medium to long-term capital appreciation by predominantly investing in equity and equity-related instruments. But, any similarity to an equity mutual fund ends there. Unlike actively managed equity fund, in a Quant fund, the selection of stocks is based on a quantitative model called the Quant Model. The New Fund Offer (NFO) of the Tata Quant Fund is open from January 3, 2020, till January 17, 2020. The Benchmark of the scheme will be S&P BSE 200 TRI.

Unlike actively managed equity funds where the buying and selling decisions are made by the Fund Manager, the Quant Funds select stocks for their portfolio based on quantitative decision-making frameworks with no or minimal human intervention. In Index Funds, the role of the fund the manager is also non-existent but the allocation is as per the weightage of the benchmark index. In the Quant funds, there could be a periodically rebalance on the basis of any major economic and market information, which may help in improving portfolio performance and mitigate risk.

What Quant funds essential does is to reduce human bias and emotion from the investing decisions. The risk profile of all these funds – Quant fund, index fund or an actively managed fund is high.

Although, predominantly it’s an equity fund but the manner your money will be deployed into the equity market will be different from an index fund or an actively managed equity fund. Quant Funds make investing decisions based on Artificial Intelligence (AI) and Machine Learning (ML). The role of the fund manager may also exist in them but is generally kept to the minimum.

The Machine Learning-based statistical models are the mainstay for taking the buy or sell decisions in such funds. With the monumental amount of data available related to stocks and markets, at times, computing them to arrive at a conclusion may become difficult for humans. On the other hand, the ability to handle massive computational intensity for stock selection is relatively easier in Quant funds.

Features

Minimum Investment Amount

  • Rs. 5,000 and in multiples of Re. thereafter.
  • Additional Investment: Rs 1,000 and in multiples of Re 1 thereafter

Load Structure

  • Entry Load (During NFO): Nil
  • Exit Load: 1 per cent of the applicable NAV, if redeemed/switched out on or before the expiry of 365 days from the date of allotment.

What to do

The long term track record of Quant Funds in the Indian market may not be there but anyone looking to invest in them may invest a small portion of their portfolio in them after considering the risk factors of such a scheme and one’s own risk profile. Quant funds may suit someone looking for an alternative to index funds and actively managed mutual funds.

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