Investors with risk appetite can look at quant funds

The machine is ‘impersonal’, and it is an attribute the world of investing rewards handsomely. Hence, quant funds using complex math algorithms are now as much in demand on D-Street as is machine learning in the new-age job world.

Tata Quant Fund is leading that pack with a new fund offer (NFO), and the issue that is now open closes on January 17. Investors can pay Rs 5,000 to buy into it, and the fund will be managed by Sailesh Jain.

“Bias that comes in from active fund management creates a risk for investors that quant models eliminate. These could be possible alternative models investors can use in the future,” said Vishal Dhawan, Chief Financial Planner, Plan Ahead Wealth Managers.


Quant funds build a portfolio of stocks using a set of predetermined rules premised on mathematical models. There is no human intervention and a fund manager relies on an automated program for buy/sell decisions.

However, since quant models are new to India, Dhawan believes investors must build exposure in a staggered manner.

Analysts believe this category of funds lies between index and active funds, where decision are machine driven and free of human judgement. “These models can help investors diversify equity portfolios,” said Vijay Kuppa, founder, OroWealth.

Tata Quant Fund will employ a proprietary quant framework that combines multiple rule engines and predictive models to create investment portfolios. It will leverage the strength of artificial intelligence and machine learning for investment decisions.

There are currently two other quant funds - Nippon India Quant Fund with assets of Rs 24 crore, and DSP Quant Fund with assets of Rs 148 crore.

DSP Quant Fund was launched six months ago and has outperformed its benchmark, S&P BSE 200, by delivering 15.54% returns, compared with its benchmark return of 7.7%. On the other hand, Nippon India Quant Fund has underperformed its benchmark over time periods of 1, 3, 5 and 10 years.

Since these are complex strategies, financial planners believe investors with an appetite for risk should invest in such a fund. First-time equity investors should use index funds or diversified equity mutual funds to build their equity allocation.