This IIFL Quant Fund NFO invests based on Quant Theme – Should you invest or avoid?

IIFL Quant Fund NFO Review – Should you SubscribeIIFL Quant Fund – NFO details and Review

IIFL Mutual Funds has launched Quant Fund NFO that would open for subscription on 8th November, 2021. This is an open-ended mutual fund scheme that invests based on quant theme. It follows SMART Strategy which is rule based factors in investing. Such investing model aims to reduce fund Manager bias in the mutual fund selection process. Should you invest in the IIFL Quant Fund NFO?  One should note that a quant fund that is existing for more than 10 years has lowest fund size, hence one should be little cautious about such funds.

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IIFL Quant Fund – NFO Details.

IIFL Quant Fund NFO would open for subscription on Monday, 8th November, 2021 and closes on Monday, 22nd November, 2021. This is an open-ended mutual fund scheme. Here are the NFO issue details.

Scheme Opens 08-Nov-21
Scheme Closes 22-Nov-21
Scheme reopens for continuous purchase/sale 06-Dec-21
Minimum Lumpsum Rs 1,000
Minimum SIP Rs 1,000 for 6 months
NAV of the fund Rs 10 during NFO period
Entry Load Nil
Exit Load 1% if redeemed within 12 months
Risk Very High Risk
Benchmark S&P BSE 200 TRI
Fund Manager Mr. Parijat Garg
Max TER 2.25%


What is the investment objective of IIFL Quant Fund NFO?

The investment objective of the scheme is to generate long term capital appreciation for investors from a portfolio of equity and equity related securities selected based on quant theme.

However, there can be no assurance or guarantee that the investment objective of the scheme would be achieved.

What is the allocation pattern in this mutual fund scheme?

This fund investment pattern is as follows:

Type of instruments Min % Max % Risk Profile
Equity or Equity related instruments 80% 100% Medium to High
Debt and Money Market securities 0% 20% Low to Medium
Units issued by REITs and InvITs 0% 10% Medium to High

IIFL Quant Fund adopts a S.M.A.R.T strategy. S.M.A.R.T. referred here is Systematically Managed Active Rule based thematic momentum strategy.

This strategy optimizes momentum factor under certain portfolio constraints. First step is to review the investment universe of Top 200 companies by market cap and liquidity listed on National Stock Exchange (NSE) or Bombay Stock Exchange (BSE). Then screening of stocks is done basis SCDV framework (see details below), liquidity and size of the rm. Once screening of list of stocks is done, each stock is updated with their momentum factor score. The momentum score is calculated using stock price and total returns over a period, usually a year, for each stock.

Why to invest in the IIFL Quant Fund NFO?

Here are a few reasons to invest in this fund.

1) This fund adopts SMART Strategy i.e., Systematically Managed Active Rule Based thematic momentum strategy. This strategy would help investors to diversify their portfolio of mutual funds through novel approach of investing.

2) This fund invests in unique proposition of a fundamentally driven quantitative approach that has diversified portfolio across sectors and across market caps which aims to outperform across market cycles.

Major risk factors you should consider before investing in such funds

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

1) IIFL quant fund investment strategies are rule-based factors which would be based on medium to long term. Such rule-based approach may not always work.

2) This fund invests up to 20% in debt instruments which has default risks, reinvestment risk, interest rate risk and liquidity risk.

3) It invests up to 25% in derivatives which are high risk.

4) This fund invests up to 10% in REITs and InvITs which are high risk.

How is the past performance of Quant theme based mutual funds?

There is only one fund that has 10+ years performance – Nippon Quant Fund (Regular fund) (AUM Size is Rs 31 Crores)

10 Year annualized returns – 12%

5 Year annualized returns – 14%

1 Year returns – 54%

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Should you invest in the IIFL Quant Fund NFO?

IIFL Quant Fund invests based quant theme. It adopts SMART Strategy (Systematically Managed Active Rule based thematic momentum strategy) which is nothing but rule based strategy. There was flood of new funds with this concept in the recent 1 year and except for Axis Quant fund, none of the other funds could attract investors and could gather only < 50 Crores of AUM per fund. There is only 1 fund which is existing in the long term of 10 years and this fund gave 12% annualized returns (the fund size is just Rs 31 Crores). These quant theme-based funds strategy can vary fund to fund and can provide moderate returns in the medium to long term. High risk investors who are looking for moderate returns can invest in such schemes, otherwise, one can avoid them.

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Suresh KP

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