AssetPlus NFO Review - Axis Quant Fund

by Anushi Jain

Axis Mutual Fund is launching an NFO, which is open for subscription from June 11th, 2021 to June 25th, 2021.

Investment Objective: The investment objective of the scheme is to seek to generate long term capital appreciation by investing based on a quantitative model

Fund Manager: Mr. Deepak Agarwal and Mr. Hitesh Das

Benchmark: S&P BSE 200 TRI

Fund Management Process:

  1. The fund follows a quant based model with the objective of shortlisting companies that fall under their Q-GARP framework - Buying Quality companies with good Growth potential at a Reasonable Price
  2. The model first eliminates stocks based on criteria like minimum market cap, data availability on earnings, liquidity in the market, etc. At this step, qualitative factor will also be applied to eliminate companies with corporate governance or promoter issues.
  3. Next, the model assigns scores to various criteria with respect to a stock and selects companies which have the highest total score. The main criteria to select stocks are
  • Quality parameters like ROE, RoCE, debt levels, etc
  • Valuation parameters like P/E, P/B, dividend yield, Price to Sales
  • Growth parameters like earnings improvement, change in profit margins, sales forecasts.

4.  The final portfolio will contain 50-60 stocks and be rebalanced periodically.

3. The fund will pick stocks that are quality businesses, have low debt, high cash flows and are expecting turnaround in their model in the near-term.

Based on our analysis, we have observed the following pros and cons

Pros:

  1. No fund manager or human bias
  2. Fundamental and valuation driven quant model
  3. Periodic rebalancing ensuring stocks that are doing badly are removed and better performing stocks are added.

Cons:

  1. New investing style in the market with limited data to support its accuracy and outcome

There are few pure quant funds in the Indian market. There is data to support that quant based and algorithmic models have worked in the U.S and other developed countries. Investors can allocate a small part of their portfolio to quant funds to participate in a new style of investing.

It is of utmost importance that the fund should be discussed with your financial advisor and then ascertain whether it is suitable to invest. Always read the scheme documents fully before investing.