DSP Quant Fund NFO – Automated Stock Selection – Should you invest?

DSP Quant Fund NFO – Automated Stock Selection - Should you investDSP Quant Fund NFO Review


DSP Mutual Funds came up with new its new fund DSP Quant Fund NFO where the selection of stocks are based on automation and with minimum bias from fund manager. This fund has opened for subscription on 20th May, 2019 and would be there till 3rd June, 2019. This automatic process of of stock selection is new concept and is attracting mutual fund investors now. What are the features of DSP Quant Fund NFO? How does the stock selection in Quant Fund work? How are other Quant Funds Performing now in India? Should you invest in DSP Quant New Fund Offer (NFO) or not?

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Features of DSP Quant Fund NFO


This is an open-ended mutual fund equity scheme.

This scheme would open for subscription on 20th May, 2019

This scheme would close for subscription on 3rd June, 2019.

Since this is an open ended scheme, it would again open for subscription after 5 business days from the date of allotment of Mf units after the NFO period. Means this would reopen for subscription on 10th June, 2019.

This scheme is available in both regular and direct plans.

This plan offers both growth option and dividend option.

This scheme is available for lump sum and SIP investment.

Minimum investment is Rs 500 and in multiples of Rs 1 there-off for lump sum investments.

Minimum investment is Rs 500 per month for monthly SIP and for a tenure of 12 months.

The NAV of the NFO is Rs 10 per unit now during initial subscription.

There is no entry load to invest in this mutual fund scheme.

There is no exit load for this scheme.

This scheme is classified as HIGH risk scheme.

Scheme total expense ratio (TER) is estimated between 1% to 2.25% of the total assets on any day.

DSP Quant Fund NFO details can be downloaded from here.

What is the investment objective and strategy of this DSP Quant Fund NFO?


Funds aim is to create a model based fund that is anchored around fundamental principles of good investing. The endeavor is to create an automated stock picking and weighting model that generates portfolios which maximize characteristics of the chosen factors while adhering to liquidity and risk concentration constraints.

How does the stock selection in Quant Fund work?


In Quant Fund investment decision or stock filtering happens based on predetermined rules and based on stastitical and mathematical model. Generally fund manager selects funds, however in Quant Fund, there is less intervention from fund manager. In this approach, fund manager designs the approach and there are choices thrown out based on which fund manager would invest.

Who can invest in this mutual fund scheme?


Any of the following can invest in this scheme in this scheme.

1) Resident Individuals

2) Resident Indian Nationals, including partnership forms, companies, Banks, HUFs, Sole Proprietorship etc.,

3) NRI’s

4) Foreign Portfolio Investors

Who is the Fund Manager of DSP Quant Fund NFO?


The Fund Manager is Mr. Anil Ghelani.

What is the benchmark for this scheme?


The benchmark for this scheme is S&P BSE 200 TRI.

Also Read: Top Ranked Mutual Funds from Value Research – Should you invest?

What is the allocation pattern in this mutual fund scheme?


This fund investment pattern is as follows:

1) It invests 95% to 100% in equity and equity related Instruments including derivatives. The risk profile in this segment is medium to high.

2) It invests 0% to 5% in debt and money market instruments. This risk profile in this segment is low.

3) It invests 0% to 5% in units issued by REIts and InvITs. The risk profile in this segment is medium to high.

Can NRI invest in this MF scheme?


Yes, they can invest in this scheme. They can invest on repatriation or non repatriation basis.

Why to invest in DSP Quant Fund?


Here are few reasons to invest in this fund.

1) This Quant Fund investments in stocks that are automated based on pre-defined filters in screening the stocks. There is minimum bias from the fund manager.

2) In quant fund approach, stocks are choosen based on high return on equity, earnings growth consistency and potential. This approach would eliminate highly volatile companies.

3) Since it is automated process and less intervention from fund manager, the fund management fees is lower. This would help to get higher returns.

Some key risk factors you should consider before you invest in such funds


One should consider some of these risk factors / negative factors before investing.

1) It invests upto 95% in equity and derivatives which is high risk. In case of stock market correction, its performance would be pathetic.

2) Elimination of human bias does not guarantee high returns.

3) Quant Funds use models based on past historical performance and future may or may not be exactly the same.

How is the Performance of Quant Mutual Funds in India?


Currently there is only 1 Quant fund i.e. Reliance Quant Fund and let us look at the performance.

This fund came almost 14 years back. The AUM is still at Rs 27 Crores. Means this fund failed to attract investors.

This fund gave 11% annualized returns in the last 10 years against benchmark of 13%.

This fund gave 8% annualized returns in the last 5 years against benchmark of 12%.

This fund gave 11% annualized returns in the last 3 years against benchmark of 15%.

This fund gave 3.6% annualized returns in the last 1 year against benchmark of 10%.

This fund gave 9% annualized returns since inception of 14 years.

Net conclusion is that Reliance Quant Fund was always under performer compared to its benchmark.

Should you invest in the DSP Quant Fund NFO?


DSP Quant Fund investment strategy is good. The stock filteration happens automatically with minimum human intervention. However what is that an investor gain out of it? If we consider the only existing fund, Reliance Quant Fund which gave 8% annualized returns in the last 14 years. Even a bank FD would have given higher returns. Moreover such concept has given lower returns compared to benchmark. Why any investor need to take high risk and take lower returns compared to benchmark. My advice is that investors should avoid such funds where the concept is yet to get matured. They can invest in good largecap mutual fund to get higher returns or returns inline with benchmark.

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Suresh KP

DSP Quant Fund NFO – Automated Stock Selection – Should you invest

4 comments

  • Namit

    Hello Sir,

    I have invested in DSP US Flexible Equity Fund in August 2018. At that time the exit load of the fund was 1%. From 1 April 2019, they have changed the exit load to 0 (nil).

    I redeemed the units on 27 May 2019 and was charged the exit load. I would like to know if DSP was right in charging the exit load. Or should I approach SEBI as there customer care denied the in waiving of exit load.

    • Hello Namit, You would NOT win. Just see the announcement about the waiver of exit load. “DSP Mutual Fund has decided to change exit load of DSP World Gold Fund, DSP World Energy Fund, DSP World Mining Fund, DSP World Agriculture Fund, DSP US Flexible Equity Fund, DSP Global Allocation Fund, DSP Natural Resources and New Energy Fund to Nil from 1% for redemption within 365 days with effect from April 01, 2019” so if you have invested after 1-Apr-19 and redeemed within 365 days there is no exit load. Here is the announcement i could see on VRO. https://www.valueresearchonline.com/story/h2_storyView.asp?str=46739

      • Namit

        Thanks for the advice.

        There is no use of wasting time in writing email and follow-up calls for an amount less than Rs.500 when chances of winning are not 100%.

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