SBI Mutual Fund To Launch SBI Quant Fund

SBI Mutual Fund, one of the very well-known asset managers with assets worth ₹11 lakh crore, is set to launch its first-ever quant fund, SBI Quant Fund. The open-ended equity scheme will employ a quantitative investing approach and be available through a New Fund Offer (NFO) from December 4 to December 18, 2024.

What is a Quant Fund?

Quant funds rely on algorithms, mathematical models, and data analysis to make investment decisions. SBI Quant Fund will follow a multi-factor-based investing strategy, evaluating stocks on parameters like momentum, value, quality, growth, and low volatility. They are doing it in a diversified method planning to balance risks and improving returns by mitigating underperformance tied to any single factor.

Investment Allocation & Strategy

The scheme’s investment includes India’s top 200 companies by market capitalization, focusing on large-cap and mid-cap stocks. Using a composite quant rank derived from factor-based evaluations, the portfolio is to be built with risk constraints like tracking error, liquidity, and active weights.

The fund’s allocation strategy includes:

• 80-100% in equity and related instruments (selected via quant models),
• 0-20% in other equity instruments,
• 0-20% in debt and money market instruments,
• 0-10% in REITs and InvITs.

The scheme is benchmarked against the BSE 200 Total Return Index (TRI). Sukanya Ghosh and Pradeep Kesavanwill manage the fund, with Kesavan handling overseas investments.

Quant Funds: A Growing Niche in India

Quant funds are at an early stage in India, with 10 active schemes managing ₹9,000 crore in assets as of October 2024. These funds’ success relies on the accuracy and robustness of their quantitative models, as flawed assumptions could lead to major setbacks.

The SBI Quant Fund marks SBI Mutual Fund’s entry into the quant investing space, offering investors a technology-driven strategy for portfolio management. While the multi-factor approach is to better risk-adjusted returns, the fund’s long-term results will depend on its models’ reliability and market adaptability.

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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.