Mutual Fund News : IIFL Mutual Fund Launches IIFL Quant Fund

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IIFL Mutual Fund has launched an open-ended equity scheme - IIFL Quant Fund.

It is an open ended equity scheme mandated to invest based on quant theme.

The investment objective of the scheme is to generate long term capital appreciation for investors from a portfolio of equity and equity related securities selected based on quant theme. However, there can be no assurance or guarantee that the investment objective of the Scheme would be achieved.

The scheme is mandated to invest 80% to 100% of its total assets in Equity and Equity related instruments of companies selected based on a quantitative model. It can also hold upto 20% of its assets in debt and money market instruments and upto 10% in Units issued by REITs & InvITs.

IIFL Quant Fund adopts a S.M.A.R.T strategy. S.M.A.R.T. is an acronym i.e. Systematically Managed Active Rule based thematic momentum strategy.

As per the Scheme Information Document, the investment process of IIFL Quant Fund will be based on thematic momentum strategy. This strategy optimizes momentum factor under certain portfolio constraints. First step is to review the investment universe of Top 200 companies by market cap and liquidity listed on National Stock Exchange (NSE) or Bombay Stock Exchange (BSE). Then screening of stocks is done basis SCDV framework, liquidity and size of the firm. Once screening of list of stocks is done, each stock is updated with their momentum factor score. The momentum score is calculated using stock price and total returns over a period, usually a year, for each stock.

The entire portfolio construction process is fully systematic – Starting from screening to the final portfolio generation. The fund house will use its proprietary quantitative models to calculate factor scores. The factor construction is continuously reviewed and methodology is based on academic literature and internal research.

SCDV framework (for screening)

As elaborated above, the fund house will use SCDV framework, liquidity, and size of the firm to screen stocks from investment universe. SCDV framework classifies companies into 4 quadrants –

a) Secular: Companies delivering 15% PAT and ROE growth rates, playing out India's secular upward growth shift e.g. Financial services, consumer discretionary, auto and auto ancillaries etc.

b) Cyclicals: High growth companies which typically have high capital expenditures and hence a lower ROE e.g. Infrastructure, logistics, capital goods etc. These have relatively higher sensitivity to business and economic cycles

c) Defensive: Companies that have high ROE and lower growth rates, low capital expenditures and sensitivity to business cycles, but that provide a cushion to returns during downturns e.g. consumer staples, healthcare etc.

d) Value Traps: Companies that register low growth rates and ROE, which are typically avoided across public equity strategies etc

IIFL Quant Fund’s performance will be benchmarked against S&P BSE 200 TRI (Total Return Index).

The fund will be managed by Mr Parijat Garg.

The NFO opens for subscription on November 08, 2021 and closes on November 22, 2021. The scheme will reopen for continuous sale and repurchase from December 06, 2021.

The minimum subscription amount is Rs 1,000 and in multiples of Re 1 thereafter.

The fund offers Regular Plan and Direct Plan having Growth Option and Income of Distribution cum Capital Withdrawal (Payout and Re-investment Facility).