A quant fund is a mutual fund whose investment and portfolio construction are done using artificial intelligence (AI), algorithmic trading, etc., with minimal human involvement i.e., the fund managers who always try to handle/invest the funds. therefore, the chances of human errors in the quant fund are very less compared to others.
Talking about the mechanism of quant funds and the risks involved, and whether investors should have such funds in their investment portfolios. Investment strategy Such funds use various tools, including established and innovative financial models, algorithms, machine learning, artificial intelligence, big data, etc to predict the future price of stocks and move according to movements. These algorithms are mainly developed based on fundamental and technical analysis which mainly deals with the price movements and the study of financial reports.
After rules are set by the fund managers, they have some daily work to monitor the changes and make the rules accordingly. However, the fund manager will keep track of things and make subtle changes to the model when necessary. These models use past and variable data such as previous transaction price, volume and the volatility beta, profitability, liquidity, momentum, alpha, correlation, covariance, and other multivariate models, and look for a model for predicting future prices.
There are currently six funds in India:
DSP Quant Fund, ICICI Prudential Quant Fund, Nippon Quant Fund, Quantamental Fund, SBI Equity Lowest Variance Fund, and Tata Quant Fund, all based on the Quant Model Act. Team. Although quant funds do not have the bias of fund managers, the stock selection method is not transparent, because each fund has its own “proprietary” model, which is not public.
The performance of these tools cannot be compared with benchmarks such as Sensex or Nifty. Therefore, when evaluating the performance of such funds, BSE 200, or Nifty 200 Total Return Index (TRI) should be considered because they provide clear performance indicators. Therefore, the concept of quant funds is new to India. As mentioned above, each fund has its own set of rules. Investors need to understand each fund model and evaluate benchmarks to compare its performance before investing.
these funds are relatively new and have less experience in evaluating their performance and performance. Therefore, conservative investors with moderate risk appetites are best to abandon these quant funds. However, aggressive investors may consider investing a small amount of capital. General investment in quant funds is used as a diversification strategy. In short, with the development and maturity of Indian technology and capital markets, financial funds will certainly have bright prospects.
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