InvestorQ : What is a Quant mutual fund?
Rishita Das made post

What is a Quant mutual fund?

Answer
image
Aastha Awasthi answered.
3 weeks ago
Follow
Quant here means quantitative, and these are the funds that use computer-based and mathematical quantitative models to invest in stocks. Under these funds, human intervention is limited. The only role fund managers play is to review and shuffle the portfolio from time to time. This type of investment follows a proper data-driven approach.

This term is not very common in India and is now used mainly in developed markets such as the US, however, many believe India to be the next developing hub for quant funds. 

Most fund houses have their own model, based on which they select stocks for the fund. It could include parameters such as B/V earnings, growth, P/E ratio, financial ratios, the stock's performance in comparison with industry standards, etc. Therefore, this fund involves extensive data shredding, and hence the fund manager’s role to choose the stocks is eliminated. Basically, only those stocks are picked that meet the criteria fed into the fund’s model. So, these funds aim to beat their respective benchmarks by investing in a concentrated portfolio of securities. 

These funds could be the future of the mutual fund industry. Currently, India has Reliance Quant Fund that totally runs on this approach and was launched in 2008. It uses Artificial Intelligence to select stocks in the fund, which requires some intervention from the fund management team.


1 Views