Aditya Birla Sun Life Quant Fund NFO: Should you invest?

Funds following quant strategy have captured the industry's attention. Currently, the Indian mutual fund industry boasts nine quant schemes, seven of which were launched after 2020. Aditya Birla Sun Life Mutual Fund , which manages assets worth Rs 3.31 lakh crore (March 2024), is the tenth entrant in the quant arena. The Aditya Birla Sun Life Quant Fund opened to the public on June 10, 2024, and will close its subscription on June 24, 2024. Here is the fund in a snapshot: NFO snapshot Fund name Aditya Birla Sun Life Quant Fund SEBI category Sectoral/thematic NFO period June 10-24, 2024 Investment objective Capital appreciation by investing in equity securities based on quant theme.  Benchmark Nifty 200 TRI Fund manager(s) Harish Krishnan and Dhaval Joshi (dedicated fund manager for overseas investments) Exit load If the units are redeemed within 90 days from the date of allotment: 0.50 per cent of the applicable NAV. Nil thereafter.  Tax treatment If the units are sold after one year, 10 per cent tax will be applicable on gains exceeding Rs 1 lakh. If the units are sold within a year, 15 per cent tax will be applicable. About Aditya Birla Sun Life Quant Fund Unlike pure equity funds, which invest in stocks based on various parameters, the quantitative (quant) theme uses various mathematical models to pick stocks. Here's how Aditya Birla's new open-end equity scheme will choose stocks for its portfolio: Identifying stocks: It will identify the top 75 stocks of the country's top 15 fund houses. These fund houses must have a track record of at least five years and sizeable equity assets. The fund model will exclude passive funds, asset allocation funds and discretionary model-based stocks. There will be a particular focus on large and mid-caps. Quality and momentum analysis: The fund will then apply the quality factor (five-year track record) and momentum factor (consistency of last six-month returns) and analyse composite scores assigned by various sell-side analysts. This will involve looking at variables such as changes in recommendations by sell-side analysts. This process will help the fund identify 40-50 stocks. Weight adjustment: Equal weights will initially be allocated to all stocks and then they will be adjusted based on low volatility. A stock with lower volatility will get higher exposure, with the highest exposure capped at 5 per cent. The scheme will be benchmarked against the Nifty 200 TRI. Performance of quant funds The one-year performance of these funds has been pretty stellar. But one swallow doesn't make a summer, meaning one year is too short a time to judge a fund. So, we looked at their three-year performance. (While three years isn't a long time either, it is sufficient to at least assess their consistency. And since most of these funds are new to the market, we couldn't fetch their longer-dated performance). Returning to these funds' three-year performance, their track record appears patchy. Only two of the five funds have outperformed the b