One, it mitigates the possibility that a call goes wrong because expectations of a turnaround or improvement do not pan out.Using these metrics and elimination does two things: The model first eliminates companies, using metrics such as a high debt to equity, high price volatility and inability to convert capital and investments into revenues and profits. DSP Quant fund – the modelĭSP Quant’s model aims to eliminate weak companies and pick only those that score high on quality and are stable. Whether this exposure will increase later to make room to meet redemptions as size increases remains to be seen. The fund does not appear to take cash calls from the first month of launch and onwards, cash exposure has been at 1-2%. Large-cap stocks have made up 85% of the portfolio on an average, with mid-cap stocks averaging 14%. It picks stocks from the BSE 200 index, giving it a predominantly large-cap bias. The fund aims to have about 30-50 stocks in its portfolio. The direct plan’s expense ratio has been at 0.54% for the past few months while the regular plan’s expense has hovered around 1.3%. However, the fund has built up a strong AUM at Rs 216 crore. DSP Quant fund – the basicsĭSP Quant was launched in June last year, so it has a limited record. With that said, let’s get on to the fund we are reviewing in this instalment – DSP Quant. They do not mimic any index but generally have an overarching theme to their methodology such as quality or minimum variance. Diversified: These funds use their own quant model to select stocks across the market.Prime ETFs, our recommended ETF list features one such index. These indices draw from parent indices such as the Nifty 100, the Nifty 50 etc, and use factors such as low volatility, value, quality equal weight and so on. Index based: These funds mirror indices built on quant models (factor-based indices).The quant funds available today are of two types – Quant funds are being categorised by AMCs under SEBI’s thematic equity category. They are best used as a portfolio diversifier with smaller allocations, and not your portfolio’s mainstay at least until they are better established. Quant funds are new and lack any record to judge efficiency of the model. While there are several positives to quant funds, at this time in our markets, quant strategies are yet to fully take shape and prominence. This means you will have a steady strategy thus providing a greater degree of predictability on what you can expect. You will know the basic principles that the model is built on. There is no active call done for different market conditions nor is there fund manager preference for specific stocks or sectors.
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