Mutual Funds NFO: Tata Quant Fund - the retail hedge fund

NFO: Tata Quant Fund – the retail hedge fund


- Advertisment -


With just Rs. 5,000 one time investment or an SIP of Rs. 1,000 per month, you can participate in a modern hedge fund like strategy driven by Artificial Intelligence/Machine Learning. That’s, in summary, the sales pitch of the newly launched Tata Quant Fund.

Did I say AI/ML in a hedge fund?

Yes! The modern hedge fund uses complex statistical models based on millions of data points, works hard to predict the market, economy, stock price movements to adjust investment strategies and make buy / sell recommendations.

Tata Quant Fund claims to be bringing the same thing to you dear retail investor. Remember, it cannot short sell stocks like a hedge fund. It will instead, use derivatives to achieve its objectives.

In the suitability section, it defines its investor as someone who prefers risk control to avoid absolute negative returns and yet generate a consistency better return than the index.

In short, minimise risk and maximise gains. Heaven is so close!

The computing systems of today make this possible. Why not? This is the age of self driving cars. They are already driving humans safely from point A to point B. We can do this with investment portfolios too!

Isn’t this old wine?

Nippon India Quant Fund and DSP Quant Fund are already using Quant models. What’s different about Tata Quant fund?

Nippon India Quant Fund is a predominantly data based model of decision making. Humans are still involved in the decision making process.

DSP Quant Fund is a static rule based model. Rules don’t change and analyst and fund managers feed to the rules with the necessary input.

Have a look at their respective portfolios to see the difference in their approaches.

Nippon India Quant Fund – Portfolio Details

Nippon India Quant Fund – Portfolio; Expense ratio (Direct Plan) – 0.19%

DSP Quant Fund – Portfolio Details

DSP Quant Fund – Portfolio; Expense ratio (Direct Plan) – 0.37%

With Tata Quant Fund, the fund is apparently taking ‘quant’ further. It will adapt its strategy (Value, Quality, Alpha or a mix) based on what the ‘AI/ML model’ predicts about market, economy, stocks, bonds, etc. Adapt is the keyword here. The model is constantly learning and improving.

The fund universe is the 200 stocks and hence its benchmark also is the BSE S&P 200 TRI.

It will be expected to operate at a lower cost too and its portfolio could undergo much more frequent changes than the other 2 quant based funds. Reason – it has to adapt in a high activity world!

I tell you, the fund has got all the right suitcase words in its sales pitch!

Should you, as a retail investor, invest in Tata Quant Fund?

As the old world ideas which have been expensive and unreliable (aka actively managed funds), the new rule based / automation driven ideas start looking attractive. But remember, the real world experience is non-existent / limited.

We don’t know if the model works?

Computer systems operate on the premise of GIGO – Garbage In, Garbage Out. If the model itself is flawed, there is little that the system can do.

What is the model ends up increasing the risk?

Will the fund managers have the discipline to let the model run like a true AI method?

Then there is the fund house, Tata MF. It’s history with fund management doesn’t inspire confidence. For years now, it has launched fund after fund, hoping to get investor attention, without much success. The only thing working for Tata MF is the TATA in its name.

So, hold on for now. Observe the quant fund for the next year or so and may be then you can take a call.

When you decide to invest, you should know that having 0.0001% of your portfolio invested in a fund is not going to make any difference. It will only bloat your portfolio with one more fund and cause more stress (lower quality of life).

Invest only if you have the inclination and courage to allocate at least 10% of your portfolio into a fund (it may be done over time).

Don’t fall in for the fancy description. Stick to your current portfolio given it is aligned to your goals.


Source link

Latest news

Sex, Drugs, And Real Estate

GettyTempe is a college town near Phoenix with around 190,000 regular residents and more than 50,000 students...

This Week’s $60 ALDI and Kroger Shopping Trips (+ a different way of grocery shopping!)

Want to see what we bought for this week’s $70 grocery budget? I’m currently challenging myself to stick...

Limits for These 2 Tax Credits Rise for 2020

Photo by baranq / Shutterstock.comYou hopefully already know that limits on many retirement accounts tend to rise each...

Benefits of the Delta SkyMiles Program

At NerdWallet, we strive to help you make financial decisions with confidence. To do this, many or all...
- Advertisement -

Questions About Dryer Balls, Authorized Users, Kakeibo, Savings Accounts and More!

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to summaries of five or...

It’s bad news for renters — especially in these high-rent cities

Rents rise in 91% of cities There’s more bad news for...

Must read

Sex, Drugs, And Real Estate

GettyTempe is a college town near Phoenix with...
- Advertisement -

You might also likeRELATED
Recommended to you