{"id":15200,"date":"2019-05-22T10:37:25","date_gmt":"2019-05-22T05:07:25","guid":{"rendered":"https:\/\/www.fundsindia.com\/blog\/?p=15200"},"modified":"2019-11-07T13:54:49","modified_gmt":"2019-11-07T08:24:49","slug":"fundsindia-reviews-nfo-of-dsp-quant-fund","status":"publish","type":"post","link":"https:\/\/fundsindia.com\/blog\/mf-research\/fundsindia-reviews-nfo-of-dsp-quant-fund\/15200","title":{"rendered":"FundsIndia Reviews: NFO of DSP Quant Fund"},"content":{"rendered":"

An NFO that\u2019s currently open is DSP Quant, a differentiated offering from DSP fund house. DSP Quant is an equity fund that will pick stocks based on quantitative models. In using such models, the fund seeks to avoid pitfalls that come from personal biases, or fund managers going wrong in market timing or predictions. At present, there is no equity fund following quant\/ factor-based investing, barring Reliance Quant. <\/span><\/p>\n

Model and portfolio<\/b><\/p>\n

Quant or factor-based models are built by considering a stock universe and applying a variety of factors or filters. Factors are metrics based on which company financial strength and growth can be judged. <\/span><\/p>\n

DSP Quant will use the BSE 200 index as the base. Therefore, the fund will have a marked large-cap tilt. DSP Quant aims at building a portfolio of quality stocks with reasonable valuations and low volatility. It does this in three ways.<\/span><\/p>\n

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    1. Weed out sub-par companies<\/b>: The model seeks to filter out highly leveraged or where the management is not aligned to shareholder interest. It also excludes companies whose earnings are not of good quality, i.e., where there could be manipulation of earnings. Finally, it also weeds out volatile and high-beta stocks. To gauge all this, the model uses a wide range of metrics, ranging from EBITDA to cash flow, debt to equity, market capitalisation, credit ratings, working capital cycle and so forth. Eliminating weak companies narrows down the field to quality and stable companies. <\/span><\/li>\n
    2. Identify sound companies: From the smaller universe of stocks, the model then looks for stocks that are good \u2013 which boils down to companies that are growing well and are reasonably valued. Metrics used here include return on equity, earnings growth and its consistency, consensus earnings growth, dividend yield, and such.<\/span><\/b><\/li>\n
    3. Ensure diversification: <\/b>In order to avoid concentration, the fund will go up to 5 percentage points overweight on a single stock compared to its weight in the index. Similarly, active weight on sector exposure will be capped at 10% compared to index weight.<\/span><\/li>\n<\/ol>\n<\/li>\n<\/ol>\n
      Invest in DSP Quant Fund Now! <\/span><\/a><\/div>\n

      The quant model assigns stocks scores for each factor, based on which the final portfolio will be drawn up. The portfolio will be rebalanced every half year, to account for new information, book profits or exit stocks that don\u2019t meet the criteria, or include new stocks. <\/span><\/p>\n\"\"<\/a>\n

      Source: AMC. Based on back-tested data. These figures pertain to the performance of the index and do not in any manner indicate the returns\/performance of the Scheme. It is not possible to invest directly in an index of the quant model.<\/span><\/em><\/p>\n

      The pros and cons<\/b><\/p>\n