Q: What would be your strategy with your quant fund this time around? How do you hope to insulate it against the kind of leverage positions that we saw in funds internationally?

A: There is no leverage permitted in a mutual fund product in India, so regulatory restrictions restrict us from doing anything of that sort. Being the first product, we would like to keep it simple, so there is no leverage in the fund. Only the money that has contributed by the unit holders would be invested in stocks now. At no point of time are we saying that this is either a capital protected model or it will preserve the capital even if the markets were to go down significantly. The intention of the fund is to generate alpha or excess returns over significantly long time periods of at least a year. 

We are fairly sure it would do that even through a bear market phase, given a period of time. It would give negative returns but these returns would be lower than those delivered by the markets.

Q: You said you have back tested it for about 11 years. What kind of returns did you see coming in on an average and what was the bad patch?

A: Since we have back tested it for so long, we have a one-year rolling return history that runs into close to 4,000 observations. On an average, the Nifty has given about 18% while this fund has delivered close to 35%. With slightly higher volatility, which actually translates into the risk-adjusted return, it is significantly higher than that of the Nifty. Also, it reduces the probability of negative returns. It also basically outperforms the market on the negative and on the positive. So, the back testing results have been very good.

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