The portfolio of a ‘quant fund’ is based on computer-based quantitative analysis working on a mathematical model, with no human judgement involved.

Lotus India Mutual Fund’s ‘Lotus India Agile Fund’ which was launched in November last year as India’s first quant fund, currently manages Rs 230 crore on behalf of around 40,000 investors.

“The Agile Fund is our largest equity fund today. Though the NAV has come down due to the correction in the market, the investor’s interest in the fund is intact,” said Rajesh Vijay Shastri , Head of Business Development and Strategic Initiative, Lotus India Mutual Fund.

Lining up

Benchmark Mutual Fund has now filed an offer document with market regulator Sebi for a quant fund while a leading fund house, it is reliably learnt, is planning to convert its index fund into a quant fund, .

Rajen Mehta, Executive Director of Benchmark Mutual Fund, said, “We have filed our document and are now awaiting Sebi’s observations.”

The quantitative analysis is undertaken using computer-based models either designed inhouse or outsourced by the fund.

“The quant fund works on an algorithm (computer based programme) which is a tough task to develop as it requires a lot of effort and research,” said Shastri. “Quant funds are more popular among the private funds such as hedge funds, rather than among public funds.”

Stock universe

The fund invests in a stock universe selected by pre-programmed guidelines. For example, in the case of Lotus India Agile Fund, the stock should have been listed for at least one year, the market cap of the stock should be higher than the market cap of the S&P CNX Nifty stock that has the lowest market cap, and so on.

The portfolio of stocks is reviewed and reset every month using the quantitative analysis model.

Quant Funds first emerged in the 1970s and became popular in the 1990s as computing methods evolved. According to an estimate, currently over $800 billion in assets under management are invested in quant funds globally.

There are around 200 fund houses in the quantitative space with 120 in the US alone.