Tata MF launches AI powered Quant Fund

By Morningstar |  07-01-20 | 

Tata Mutual Fund has launched an artificial intelligence and machine learning powered fund called Tata Quant Fund. The open-ended fund employs a proprietary quant framework that combine multiple rule engines and predictive models to create investment portfolios.

The fund will use broad and persistent factors of stock returns are used for building rule engines for portfolio creation. Each rule engine uses scoring to create concentrated portfolios with attributes like 'value', 'quality', 'momentum', 'size' and couple of combination attributes. Thereafter, the machine learning powered predictive algorithms decide basis prevailing market and macro-economic conditions, portfolio with which attribute is likely to outperform during the next month.

The algorithms also predict absolute direction (positive or negative) of return for the next month. Long position in selected portfolio is taken only for months where predicted return is positive. During months where predicted returns are negative, the strategy uses derivatives to hedge the gross long equity position held previously. Tata Quant Fund portfolios are rebalanced monthly for optimal performance at low risks.

The predictive engines use more than past 20 years of market and macro-economic data to analyse hidden relationships and patterns. These correlations along with prevailing market and macro-economic data are then used by the engines for making monthly predictions. The portfolio will have a maximum of 30 stocks.

The machine learning predictive models also recalibrate and re-adjust at a fixed periodicity by using new and incremental data. This enables the models to factor in emerging patterns and relationships. These algorithms are developed and managed in-house by a dedicated team of data science specialists.

Benchmarked against BSE 200 TRI, the new fund offer opened on January 3, 2020 and closes on January 17, 2020.  The fund will be managed by Sailesh Jain.

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