Franklin Templeton launches multi-factor quant fund at a time of regulatory churn and high valuations

Finding Alpha Across Factors
Franklin Templeton’s new multi-factor fund aims to bring more structure and data discipline into equity investing. The model has been back-tested since 2009 on the Nifty 500 universe, showing an excess return of about 4 percent over the benchmark, though these are simulation results.

Globally, Franklin Templeton’s quantitative investment team manages over $98 billion across markets.

Adam Petryk, Executive Vice President and Head of Franklin Templeton Investment Solutions, said the approach adapts to diverse environments and doesn’t necessarily translate into a tech-heavy portfolio.

“We use data and AI techniques to identify the best investments — not to create a portfolio full of technology stocks,” Petryk said. “Across markets, we’ve seen that combining quantitative methods with human judgment delivers more consistent results.”

The fund’s launch comes at a time when the mutual fund industry is navigating a changing regulatory and market landscape. Satwalekar said that while some of the recent measures — such as incentives for B30 investors and first-time women investors — are constructive, the revised TER caps will require some recalibration.

He, however, dismissed the idea that these developments influenced the timing of the launch.

Market Sentiments
Satwalekar also spoke about his faith lies in equities over and above any other asset class. Especially, across the Indian markets which continues to be strengthened by domestic tailwinds than getting influenced by external headwinds as much. But his preference also echoed his stance on the role of hybrids as a stabiliser. “For those uncomfortable with current valuations, a balanced advantage or multi-asset approach offers a good starting point,” he said.

Further, “The idea that FPI flows drive alpha doesn’t hold anymore. Domestic participation is now the dominant capital source. What we’re seeing since last year is more of a time correction than a structural slowdown,” he added.

Looking ahead, Satwalekar expects the earnings momentum to strengthen as festive demand and domestic consumption feed through to corporate results. “We’ve already seen encouraging signs this festive season. If that sustains through Q3 and Q4, market sentiment could improve,” he said.

He remains constructive on consumption and healthcare, sectors he believes combine steady long-term potential with cyclical recovery. “Healthcare tends to go quiet for a while before coming back — and it’s returning now,” he said. “Consumption, meanwhile, continues to be the most dependable domestic story for me, I have always been in favour of its long-term conviction.”

Satwalekar added that while AI-led rallies dominate global markets, India’s opportunity lies in its role as an enabler rather than a speculative participant. “The AI bubble isn’t India’s bubble,” he said. “Our opportunity lies in providing the arms — the services and tools that support the global AI ecosystem.”

Meanwhile, adding to the conversation on if investor appetite is driving the strong IPO pipeline or is it vice versa, he said, “When too many sellers appear, buyers should ask why.” He goes on to add that systematic investing through SIPs and hybrid strategies remains the best route to navigate volatility.

“The kind of commitment and discipline in investing requires a long-term view. For instance, if investors had simply left their SIPs untouched through last year’s downturn, they’d be better off today,” he said. “Because the goal isn’t just higher returns, but better risk-adjusted outcomes.”

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.