Tata Quant Fund Invest based on Quantitative Model – Should you invest?

Tata Quant Fund Invest based on Quantitative Model - Should you invest in this NFOTata Quant Fund Invest based on Quantitative Model – Should you invest in this NFO?


Tata Quant Fund would open for subscription on 3rd January, 2020. This is an open ended mutual fund scheme that follows the Quant based investment theme which is nothing but mathematical model. The Quant investing model aims to remove Fund Manager bias in the mutual fund selection process. What are the Tata Quant Fund Issue details? Should you invest in the Tata Quant Fund NFO now?

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Tata Quant Fund NFO Issue Details


This is an open-ended mutual fund equity scheme.

This mutual fund scheme would invest based on the Quant model i.e. mathematical model which aims to remove fund manager bias and emotions.

This scheme would open for subscription on 3rd January, 2020

This scheme would close for subscription on 20th January, 2020

Since this is an open ended scheme, it would again open for subscription on 28th January, 2020 after NFO period.

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 5,000 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 6 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 an exit load of 1% if the mutual fund units are redeemed within 365 days.

This scheme is classified as HIGH risk scheme.

KIM of Tata Quant Fund can be downloaded here.

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


The investment objective of the mutual fund scheme is to generate medium to long-term capital appreciation by investing in equity and equity related instruments selected based on a quantitative model (Quant Model).

However, there is no assurance or guarantee that the investment objective of the Scheme will be achieved. The scheme does not assure or guarantee any returns.

What is Quant Based Investing Model?


The mutual fund strategy would be to construct a diversified portfolio across market capitalization and sectors. The quant model-based factor strategy is expected to provide the combined benefits of active and rule based systematic investments by minimizing the influence of human emotions and biases in decisions, increasing discipline and leverage computation power of machines for operational efficiency.

The investment strategy of this fund is to use proprietary in-house Quant Models for

(a) Optimal factor-based portfolio construction and

(b) Identify hedge positions (partial of full) or reduce net long equity exposure to improve performance consistency.

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The Quant Model will use parameters that include:

1) Equity stocks selection will be from a universe of S&P BSE 200

2) Fundamental parameters that are also used in Factor Models like

Return on Equity & capital employed

Earnings, dividend and leverage

3) Macroeconomic parameters related to

GDP & inflation

Interest rates

Currency & commodity, etc.

4) Index movements

The above list is illustrative and may include additional parameters or exclude some parameters with the change in the market conditions or economic factors/situations.

The portfolio will be re-balanced at a monthly frequency; however, the Fund Manager may alter this frequency based on the market conditions.

Who is eligible to invest in this new mutual fund scheme?


The following is eligible to invest in this new fund.

1) Resident individuals, either singly or jointly.

2) Minors through Parents/ Legal Guardian.

3) Hindu Undivided Family (HUF) through its Karta.

4) Partnership Firms in the name of any one of the partners.

5) Proprietorship in the name of the sole proprietor.

6) Companies, Body Corporate, Societies, Association of Persons, Body of Individuals, Clubs and Public Sector Undertakings registered in India if authorized and permitted to invest under applicable laws and regulations.

7) Banks

Complete list of eligible participants who can invest can be checked in prospectus of this new fund offer.

Who is the Fund Manager of Tata Quant Fund?


The Fund Manager is Mr. Sailesh Jain. Currently he is managing the following funds.

Tata Digital India Fund – Regular Plan – since Nov 2018

Tata Equity Savings Fund – Regular Plan – since Nov 2018

Tata India Pharma & HealthCare Fund – Regular Plan – since Nov 2018

Tata Resources & Energy Fund – Regular Plan – since Nov 2018

Tata Arbitrage Fund – Regular Plan – since Dec 2018

Tata Nifty Exchange Traded Fund – Regular Plan – since Dec 2018

Tata Balanced Advantage Fund – Regular Plan – since Jan 2019

Tata Nifty Private Bank Exchange Traded Fund – Regular Plan – since Aug 2019

What is the benchmark for this scheme?


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

What is the allocation pattern in this mutual fund scheme?


This fund investment pattern is as follows:

1) It invests 80% to 100% in equity and equity related instruments. The risk profile in this segment is medium to high.

2) It invests 0% to 20% in debt and money market instruments. The risk profile in this segment is low to medium.

3) It invests 0% to 10% in units of 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. However, Resident of Canada, US persons and OCBs cannot invest in this scheme.

Why to invest in the Tata Quant Fund?


Here are a few reasons to invest in this fund.

1) This fund invests based on the quant based investing theme which is a unique model.

2) The investment theme would minimize human intervention, hence emotions and fund manager biased decisions would be put aside.

Major risk factors you should consider before investing in such funds


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

1) The mutual fund would be investing in equity and related securities where portfolio construction and periodic rebalancing will be based on quantitative models. These models are based on historic correlations of a certain set of parameters with the price movements of stocks and markets. The models may take time to adjust to new changes to the historical relationships. During such periods before the quant models adjust to new conditions, the scheme may fail to give optimal returns. Thus, investing in a theme specific scheme may involve additional risk.

2) Quant Funds Investment strategies are rule-based, driven by algorithms developed basis historical relations of multiple factors with stock price movements. One of the risks in a quant-based model would be the time taken by the algorithm to adapt to new development or change in how  certain factors influence market or stock dynamics. The success of the model is based on the systematic investment approach and therefore it may not be able to leverage short term opportunities available in the market from time to time.

2) This fund invests some of the investments in debt instruments of corporates which is high risk.

3) This fund invests in REITs and InvITs which are high risk.

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How is the Performance of mutual funds that are investing based on Quant model?


Quant investing model is emerging only now. There are only 2 existing mutual fund schemes that are investing based on this model. Here is the performance of these funds.

#1 – Nippon India Quant Fund: This fund gave 8% annualized returns in the last 10 years, 6% annualized returns in the last 5 years, 11% annualized returns in the last 3 years and 7% returns in the last 1 year. If you would have invested Rs 1,000 per month through SIP for 10 years the investment would have been Rs 1.2 Lakhs and this investment would have now grown to Rs 1.8 Lakhs. Even Rs 1,000 per month for 5 years SIP would have grown to Rs 71,000 against the investment of Rs 60,000.

#2 – DSP Quant Fund: This fund delivered 10% returns in the last 6 months since inception while S&P BSE 200 TRI gave only 4%. If you would have invested Rs 1,000 per month through SIP for 6 months the investment would have been Rs 6,000 and this investment would have now grown to Rs 6,500.

Should you invest in the Tata Quant Fund NFO?


The Tata Quant Fund invests based on quant investing model, i.e. mathematical computations. There are only 2 funds in this theme as of now. While short term investment returns look good, in the long term, this looks more like mathematical model. If you are really interested in investing in thematic funds, there are several consumption based mutual funds or rural theme mutual funds which you can try. 

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Suresh KP

Tata Quant Fund NFO Review

Suresh KP

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