Quantitative investing offers better risk-adjusted returns, but demand expertise: Expert

Quantitative investing and its associated quant funds have emerged as a burgeoning trend in India, drawing increasing interest from investors. This approach utilises mathematical and statistical models to make investment decisions, offering potential benefits of improved risk-adjusted returns compared to traditional mutual funds, Sandeep Tandon, Founder & CIO at Quant Mutual Fund told CNBC-TV18.

However, he cautioned that due to their complexity, quant funds demand expertise and a deep understanding of quantitative investing.

Quant funds typically feature a combination of passive and active investments, with fund managers taking a less active role in investment decisions. The strategies employed by each quant fund are based on the underlying risk exposures of their investment portfolios.

India currently boasts seven mutual fund schemes that offer quant investing, managing assets worth Rs 3,500 crore, according to Tandon in an interview with CNBC-TV18. Most of these funds utilise single factor or multi-factor models to narrow down the investment universe and tailor their approaches accordingly.

The four primary types of quant funds found in India are as follows:

Single Risk Exposure Funds

Smart Beta Funds

Multi-Factor Model Funds

Long-Only or Long-Short Funds

Open to all investors, quant funds are taxed similarly to other equity mutual fund schemes, providing a level playing field for those seeking to participate in this promising investment avenue.