Prabhudas Lilladher blends fundamentals, technicals, valuations, macros in quant PMS 'AQUA'

Quant funds

Prabhudas Lilladher has launched AQUA, a quant-based flexicap PMS strategy as a blend of fundamentals, technicals, valuations and macros.

The strategy, launched on September 5, seeks to provide investors with portfolio investments that are agnostic to style, sector, size and benchmarks. The flexicap equity portfolio “dynamically adapts to the changing market cycles and investment regimes,” the brokerage house said in a statement.

The PMS first eliminates 200 stocks out of the BSE 500 on the basis of liquidity and fundamentals. Each stock is then given a score based on the fundamental, valuation and technical rating. The PMS then identifies the current market cycle and chooses an investment style regime and generates sector ranks. It then provides the sector ranks and style ratings to each stock, and then constructs the final portfolio based on 25 stocks that have the highest scores.

The portfolio is rebalanced every two months, as the firm said that one month is too short a time for the securities, while three months match the quarterly cycle and transactions during results season and institutional transactions.

Launched for early investors on June 12, the AUM of the PMS has reached around Rs 53 crore. Till August 31, AQUA generated a return of 14.91 percent compared to 6.61 percent for BSE 500, delivering an Alpha of 8.3 percent.

“Quantitative investing is a more sophisticated investment approach because it uses data and a rigorously tested scientific approach to drive investment decisions. We truly believe that if you cannot test the strategy, you cannot trust it,” Siddharth Vora, Head of Investment Strategy and Fund Manager at the brokerage said.

Vora added that quant-based funds are underpenetrated in India. “India has a long journey, we haven’t even started yet. Indian assets that are quantitatively managed are less than 0.5 percent.” he said.