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Best Quant Mutual Funds to invest in 2022

Asefa Hafeez

Algorithms such as Machine Learning and Artificial Intelligence have become global buzzwords, affecting nearly every industry and redefining our understanding of the human-machine interface worldwide However, contemplating the usage of these machine-interactive languages in a market dependent mostly on human judgments, such as mutual funds, almost seems excessive. However, AI and machine learning are now utilized in the mutual fund industry through Quant mutual Funds.

 

Over the past several decades, the Indian capital market has been dominated by active investing, with the fund manager’s ability to identify top-performing equities and the appropriate sectors being highly prized. Quant mutual Funds have lately gained appeal in India, as institutional investors have failed in recent years to exceed benchmarks. Advocates of quant funds assert that using inputs and computer algorithms to select assets reduces the risks and expenses associated with human fund management. Therefore, let’s examine what Quant Funds are, how they operate, and whether you should invest in them.

 

 

What are Quant Mutual Funds?

 

Quant funds are akin to quasi active, quasi passive investments. The fund manager is ultimately responsible for investing decisions. A collection of rules and investing regulations determine the appropriate course of action. The established norms and regulations are automated mathematical and statistical procedures. There is the option of making value judgments. This method generates a portfolio template, commonly known as a quantitative fund model portfolio. Along with algorithms and processes to be followed, a quantitative model is known as such. The fund manager must periodically reproduce the model portfolio (monthly or quarterly). Regularly, the fund manager simply makes small adjustments to the portfolio. This method is referred to as quantitative investing.

 

The major responsibility of the fund manager is to replicate the portfolio and monitor the performance of the fund. Additionally, it aligns the portfolio with model outcomes. In addition, the fund manager introduces the quantitative fund only after extensive study, model testing, and simulation. As a result, the fund manager can also monitor the refinement of the portfolio as markets fluctuate over time.

 

Active fund investing resembles basic study and investment for future growth more than passive fund investing. Quantitative investing, on the other hand, involves trend analysis, computation, and statistical modeling of historical data. Thus, it is more aligned with mathematics and science, which assume that outcomes are predictable and reproducible.

 

Type of Quant Mutual Funds:

 

Traditional mutual funds are categorized by market capitalization, investment style, sector or theme, among other factors. Quant funds, on the other hand, are categorized based on quantitative parameters or statistical metrics inside the model. In India, quantitative funds use’single factor’ or’multi factor’ models. Based on these variables, these models are intended to filter the fund’s investing universe into a model portfolio.

 

Typically, the quant technique begins with the selection of market data (e.g., the NIFTY 500 companies) to determine when quant screens will begin working. The quantitative model is implemented, which serves as a filter (filters to narrow down the 500 companies). It typically cuts the list of 500 companies to approximately thirty. In order to create a model portfolio, the companies are then rated based on the quantitative factor’s strength. 

 

 

It is the most prevalent quantitative method in India. Typically, they are created around these components and expressed as ratios such as P/E, P/B, etc. Additionally, they analyze the quality using ROE and ROCE. Statistical phenomena such as volatility are also investigated using standard deviation or beta.

 

These characteristics vary from company to company. As a result, only top enterprises will be included in the final model portfolio. These companies are ranked and selected based on one of the above criteria.

 

 

Multifactor models express the return on an investment in terms of the asset’s risk in relation to an array of factors. Typically, these models integrate systematic aspects that characterize the average returns of a large number of volatile assets.

 

Multifactor models are utilized by asset owners, investment firms, investment consultants, and financial analysts for a variety of portfolio design, asset management, risk assessment, and general analytical purposes. Multifactor models offer greater descriptive flexibility and power than single-factor models, which are generally concentrated on the market-risk factor.

 

Features of Quant Mutual Funds

 

 

 

 

 

 

Who Should Invest In Quant Mutual Funds?

 

Quantitative funds are suitable for investors who intend to maintain their holdings for a lengthy period of time. This is owing to the fact that the proposed method may require substantial time to provide its full benefits. Therefore, investors aiming to record profits during favorable market conditions may avoid quantitative funds.

 

In addition, investors anticipate that these funds will readily generate substantial profits. However, they do not guarantee return. Minimizing human biases does not ensure the success of the fund. These funds are based on past performance and other factors that are not precise forecasts of future results. Therefore, investors interested in quant funds must understand the level of mathematics and programming involved.

 

Pros and Cons of Quant Funds

 

These are the pros of investing in quantitative funds:

 

 

 

 

 

 

Cons

 

The limitation of investing in quantitative funds are as follows:

 

 

 

 

List of Quant Mutual Funds In India

 

Mutual Fund Scheme AUM  (INR)
Quant Quantamental Fund 135.63 Cr
Nippon India Quant Fund 32.71 Cr
Axis Quant Fund 1,305.39 Cr
ICICI Prudential Quant Fund 62.83 Cr
Tata Quant Fund 42.07 Cr
DSP Quant Fund 1,332.95 Cr

 

Here is the Closer Look Over Quant Funds:

 

 

This fund has existed for 1.5 years, having been established on 13 April 2021. As of 3rd October 2022, Quant Quantamental Fund Direct Growth has INR 135.63 Crores in assets under management (AUM) and is a minor fund within its category. The fund’s expense ratio of 0.56% is lower than the expense ratios of the majority of other similar funds. Quant Quantitative Fund Direct – Growth returns during the previous year were 15.30%. Since its inception, it has generated average annual returns of 18.66%.

 

 

 

 

This fund has existed for nine years and nine months, having been established on January 1, 2013. As of 3rd October 2022, Nippon India Quant Fund Retail Direct Growth has INR 32.71 Crores in assets under management (AUM) and is a medium-sized fund within its category. The expense ratio of the fund is 0.3%, which is less than what the majority of similar fund charge.

 

The one-year returns for Nippon India Quant Fund Retail Direct-Growth were 1.33 percent. Since inception, it has generated average yearly returns of 11.67 percent. Every three years, the fund has doubled the money invested in it.

 

 

 

 

 

This fund has existed for one year and three months, having been established on 11/06/2021. As of 3rd October 2022, Axis Quant Fund Direct Growth has 1,305 Crores in assets under management (AUM) and is a medium-sized fund within its category. The fund’s expense ratio of 0.49% is lower than the expense ratios of the majority of other funds in its category. Last year, Axis Quant Fund Direct – Growth returns were 0.27 percent. Since its introduction, the average yearly return has been 7.62%.

 

 

 

 

This fund has existed for 1.10 years, having been established on November 23, 2020. As of 3rd October 2022, ICICI Prudential Quant Fund Direct Growth has 62.83 Crores in assets under management (AUM) and is a medium-sized fund within its category. The fund’s expense ratio of 0.49% is lower than the expense ratios of the majority of other funds in its category.

 

ICICI Prudential Quant Fund Direct – Growth returns over the past year have been -3.18 percent. Since its inception, it has generated average annual returns of 20.18%.

 

 

 

 

 This fund has existed for two years and nine months, having been established on January 3, 2020. As of 3rd October 2022, Tata Quant Fund Direct Growth has 42.07 Crores in assets under management (AUM) and is a medium-sized fund within its category. The expense ratio of the fund, at 0.9%, is greater than that of the majority of the funds in its category.

 

The one-year growth returns of Tata Quant Fund Direct were -4.07%. Since inception, it has generated average yearly returns of 2.26 percent.

 

 

 

 

This fund has existed for three years and four months, having been established on May 20, 2019. As of 3rd October 2022, DSP Quant Fund Direct Growth has INR 1,332.95 Crores in assets under management (AUM) and is a medium-sized fund within its category. The fund’s expense ratio of 0.56% is lower than the expense ratios of the majority of other funds in its category.

 

DSP Quant Fund Direct – Growth returns during the past year were -8.08 percent. Since its inception, it has generated average annual returns of 15.34%. Every three years, the fund has doubled the money invested in it.

 

The DSP Quant Fund Direct – Growth scheme’s ability to provide consistent returns is comparable to the majority of funds in its category. It has a below-average capacity to control losses in a sinking market.

 

 

 

Conclusion

 

With all the risks and uncertainty associated with quant investing, objectivity, reasonable transparency, and decreased costs combine for a credible argument. Consequently, if you are an investor with a high risk tolerance and a decent understanding of markets and possibly even this field, you may consider attempt quantitative investing with a long investment horizon.

 

FAQ

 

Quant funds may make investment decisions faster than human managers. As a result, they may make purchases more quickly and profit more effectively from minuscule price differences, something regular mutual funds may not be able to do. 

 

One can start investing in Quant Mutual Fund Online in Kuvera.

 

To Calculate the mutual fund sip, one need to take certain things such as

And also use sip calculator to calculate SIP amount.

 

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