SOIL WEALTH Investing in Regenerative Agriculture across ...
Aim to build wealth by following a Rule-Based Investing ...
Transcript of Aim to build wealth by following a Rule-Based Investing ...
Aim to build wealth by following a Rule-Based Investing Approach
Investing Evolution
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60s
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70s
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80
-90s
ACTIVE
RETURNS
ALPHA
MARKET
BETA
ALPHA
VALUE OR
GROWTH
BETA
MARKET
BETA 20
00
on
ward
s
ALPHA
FACTORS
(Single or
Multifactor)
MARKET
BETA
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CONFIRMATION
BIAS
Investor X wants to
buy Stock ABC
when the price dips
News #1: Price fell
News #2: Price fell due
to quality failure
X will only ACCEPT
News #1 &
IGNORE News #2
Stock selection based on
PARAMETERS OVER
ASSUMPTIONS
The above are for illustration purpose only
Behavioral Biases affecting Investing Decisions
BIASOPTIMISM
BIAS
LOSS AVERSION
BIAS
SITUATIONInvestor X holds a huge
quantity of Stock ABC
Investor X holds Stock ABC
News #1: Price fell
due bankruptcy claim
RECENCY
BIAS
Investor X holds Stock ABC
News #1: Price rallied
20% over 5 years
News #2: Price fell over
the last 3 months
ACTION
RULE-BASED SOLUTION
Weights are assigned
based on
CALCULATIONS OVER GUT
Rebalancing is done
based on
FACTS OVER SENTIMENTS
Portfolio turnover is
based on
SET PRINCIPLES OVER
IMPULSE
X believes that the price
will only rise & never fall
X will continue to hold
with a hope of revival
Investor may act
based on News #2
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Presenting,
ICICI Prudential Quant Fund
A Shift from Human to Rule Based Investing
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ICICI Prudential Quant Fund
A Fund investing based
on Quantitative Model
ensures limited human
intervention in the
entire process of
screening and selection
of stocks
While certain other
quant models help to
ascertain optimum
asset allocation, this
Quant Model helps to
select relevant stocks
based on predefined
parameters
Various quantitative
parameters are
considered while
constructing the
Quant Model
A Rule Based
Quantitative Model may
help to avoid pitfalls
of behavioral bias as
well as minimize
‘Greed’ and ‘Fear’
The Quant Model
will be reviewed
periodically as various
parameters perform in
different market cycles
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Portfolio Construct Based on Quant Model
The Scheme will invest in equity & equity related securities selected based on
an in-house proprietary Quant model.
• Use of various
Quantitative parameters
• Equal weights to the
parameters
•Review of parameters at
set frequency to avoid bias
• Considering the market
cap and composite score of
stocks screened by the
model, individual weights
shall be assigned
• Important in order to
avoid liquidity risks
• Review of Parameters
• Periodic Rebalancing
• Adhoc - Rebalancing
SCREENING SIZING REBALANCING
The asset allocation and investment strategy will be as per the provisions of the Scheme Information Document.
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Screening
Eliminating stocks from the Universe based on not
meeting the requirement of the parametersNEGATIVE SCREENING
SELECTING
SCORING
SIZING
Shortlisting companies based on various macro,
fundamental and technical factors
Arriving at a composite score for each company by
giving equal weights to each parameter
Construction of a portfolio of 30-60 stocks using
the Composite Score and Market Cap
UNIVERSE: S&P BSE 200 INDEX
The asset allocation and investment strategy will be as per the provisions of the Scheme Information Document.
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The above list is indicative and is only for illustrative purposes
Screening – Quantitative Parameter
• Quantitative Parameters help to ascertain absolute and relative valuations
• Use of various parameters
• Parameters are reviewed on an annual basis in consultation with the CIO
• Parameters selected are given equal weights to arrive at a composite score
MACRO
INDICATOR:
• Mcap to GDP
• Currency
movement
FUNDAMENTAL
PARAMETERS:
• Price to earnings
ratio (P/E Ratio)
• Price to book
value (P/B Ratio)
• Dividend Yield
• Return on equity
• Return on assets
TECHNICAL
INDICATORS:
• Relative Strength
Index (RSI)
• Moving Average
Convergence
Divergence
(MACD) etc.
Below are a few Quantitative Parameters*:
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Portfolio Construct
METHODOLOGY
The asset allocation and investment strategy will be as per the provisions of the Scheme Information Document.
UNIVERSE:
Apply the corporate governance filter to the S&P BSE 200 Index universe
FACTOR CONSIDERED:
The factors are dynamic in nature. Therefore, the Fund Manager will evaluate the factor/parameters
considered in the model on annual basis.
Model takes into consideration various macro indicators and fundamental parameters including Price to
Earnings, Dividend Yield, Return on Assets, Analyst Rating, etc.
WEIGHT TO EACH FACTORS:
Assign equal weights to all the chosen factor values to come up with composite factor value.
STOCK/SECTOR LEVEL CONSTRAINS:
Limit stock level weight to 10% and sector level weight to 30% on the higher side
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Past performance may or may not sustain in the future. The performance of the scheme is benchmarked to the Total Return variant of the Index.
2020(YTD): As of October 31, 2020. Source: www.nseindices.com
Factors keep on rotating year on year
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 (YTD)
31.1 -12.0 38.3 21.0 48.7 10.8 7.6 57.5 11.6 11.0 8.6
25.4 -14.3 33.3 13.4 39.1 10.0 4.7 37.7 8.2 8.6 7.7
24.9 -15.8 31.9 13.1 38.2 4.6 4.2 35.8 6.0 8.6 6.4
24.7 -16.1 31.0 11.8 36.6 3.6 4.0 31.8 5.8 7.6 5.8
18.2 -20.9 27.0 6.2 35.0 0.0 2.9 30.3 -1.5 5.6 3.6
15.2 -26.4 26.7 3.9 32.6 -5.8 2.1 23.5 -1.6 5.4 -1.7
The factor that plays out keeps on changing every year.
Value played out in 2010 and then directly in 2018 while Momentum
played out from 2014 through 2017.
Index Name
Nifty 100 Low Volatility 30 TRI
NIFTY 100 Quality 30 index TRI
Nifty 50 Value 20 TRI
Nifty 200 Momentum 30 TRI
Equal Weight To Each Factor
Nifty 500TRI
FACTOR
Volatility
Quality
Value
Momentum
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Above is only for illustrative purposes
Screening - Illustration
• Negative screening excludes 30 stocks from S&P BSE 200 Index Universe
• Arranging remaining 170 stocks in descending order based on the composite scores
• Arriving at 30-60 stocks depending on the AUM of the Fund
Sr. No. Company AMFI Sector Factor 1 Factor 2 Factor 3 Factor 4Composite
Score
1 A Energy 1.00 0.80 1.00 0.85 3.65
2 B IT 0.90 0.85 0.90 0.85 3.50
3 C Financial Services 0.85 0.90 0.85 0.80 3.40
4 D Consumer Goods 0.90 0.70 0.65 1.00 3.25
5 E Financial Services 0.85 0.85 0.80 0.70 3.20
- - - - - - -
- - - - - - -
- - - - - - -
168 FL Financial Services 0.20 0.30 0.30 0.35 1.15
169 FM Construction 0.40 0.10 0.15 0.45 1.10
170 FN Automobile 0.30 0.20 0.15 0.35 1.00
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Screening - Illustration
• Stocks selected shall be assigned score based on their market cap of Company and Composite Score
• Assigning weights based on market cap shall help manage the liquidity risk
• Also, stock and sector level limits of 10% and 30% to be imposed for risk management
ILLUSTRATION:
Sr. No. Company AMFI Sector Factor 1 Factor 2 Factor 3 Factor 4Composite
ScoreWeightage*
1 A Energy 1.00 0.80 1.00 0.85 3.65 4.4%
2 B IT 0.90 0.85 0.90 0.85 3.50 7.1%
3 C Financial Services 0.85 0.90 0.85 0.80 3.40 9.9%
4 D Consumer Goods 0.90 0.70 0.65 1.00 3.25 7.2%
5 E Financial Services 0.85 0.85 0.80 0.70 3.20 2.5%
- - - - - - - - -
26 AA Financial Services 0.70 0.60 0.40 0.30 2.00 0.3%
27 ZZ Cement 0.80 0.75 0.20 0.20 1.95 1.5%
28 AB IT 0.60 0.55 0.50 0.25 1.90 1.2%
29 AC Consumer Goods 0.55 0.50 0.30 0.50 1.85 1.0%
30 AD Financial Services 0.50 0.55 0.50 0.20 1.75 0.3%
100.0%*Weightage = Composite Score of each company x Free Float Marketcap |Above is only for illustrative purposes
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Model Performance
Past performance may or may not sustain in future. All information contained in this slide is for illustration purpose only to show how quant models function. The model performance is derived
based on back tested result considering Price to Earnings, Dividend Yield, Return on Assets and Analyst Rating as parameters. The back tested result does not in any way indicate the
performance of the Scheme. The actual model and the Scheme portfolio shall be constructed based on the provisions in the Scheme Information Document. Data as of October 30, 2020.
Source: MFI Explorer
Calendar Year Returns (%)
Model outperformed the Benchmark 10 out of 14 times till 2019
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19.9
65.2
(48.4)
132.7
23.0
(28.5)
52.3
1.3
71.1
1.8
18.3
49.1
(9.9)
2.6
18.7
62.3
(55.9)
90.9
17.8
(26.0)
33.2
6.1
37.4
(0.2)
5.4
35.0
0.8
10.4
2006* 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Model S&P BSE 200 TRI
2006* : AUG 31,2006 TO DEC 31, 2006
Model Performance – NAV Chart
Past performance may or may not sustain in future. All information contained in this slide is for illustration purpose only to show how quant models function. The model performance is derived
based on back tested result considering Price to Earnings, Dividend Yield, Return on Assets and Analyst Rating as parameters. The back tested result does not in any way indicate the performance of
the Scheme. The actual model and the Scheme portfolio shall be constructed based on the provisions in the Scheme Information Document. Data as of October 30, 2020. Source: MFI Explorer
REB
ASE
D T
O 1
00
879
425
0
100
200
300
400
500
600
700
800
900
1000
Model NAV 100 S&P BSE 200 TRI
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Rebalancing
Rebalancing will be carried out during following scenarios:
AD-HOC
REBALANCE
PERIODIC
REBALANCE
• Ad-hoc basis to factor any:
• Adverse news
• Corporate Action
• Ratings downgrade etc.
• Annual review of parameters
of the quant model
• Portfolio to be rebalanced
to give effect to changes
suggested by quant model
• The portfolio will be
rebalanced on monthly
basis or quarterly basis.
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Why invest in ICICI Prudential Quant Fund?
Passive Investing through a model
using a combination of factors
Team with prior experience in managing
quantitative models for asset allocation
Limited Human Intervention
to avoid any biases
Diversification across various
sectors, styles and businesses.
Systematic approach of investing by combining
investing experience and avoiding human error
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Fund Manager Profile
ROSHAN CHUTKEY has a Masters in Finance degree
from London Business School.
Besides, he has done his engineering from IIT Madras and
MBA from IIM Lucknow along with completing the CFA
Program from the CFA Institute, US.
He has been associated with ICICI Prudential AMC from
February, 2015 and has 15 years of experience.
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New Fund Offer Details
New Fund Offer
period
November 23 ,2020 to December 07, 2020
To generate long-term capital appreciation by predominantly investing in equity and equity
related instruments selected based on a quantitative model.
S&P BSE 200 TRI
Investment Objective
Benchmark
Minimum Application Rs. 1,000/- (plus in multiple of Re. 1)
SIP amount Daily, Weekly, Fortnightly, Monthly SIP: Rs. 100/- (plus in multiple of Re. 1/-)
Minimum installments: 6
Quarterly SIP: Rs. 5,000/- (plus in multiple of Re. 1/-)
Minimum installments – 4
Exit Load ENTRY LOAD:
Not Applicable.
EXIT LOAD:
1% of applicable Net Asset Value – redeemed within 3 months
Nil - if redeemed after 3 months
Fund Manager Roshan Chutkey
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Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Disclaimer: All figures and data given in the document are dated unless stated otherwise. In the preparation of the material contained in this document, the AMC has
used information that is publicly available, including information developed in-house. Some of the material used in the document may have been obtained from
members/persons other than the AMC and/or its affiliates and which may have been made available to the AMC and/or to its affiliates. Information gathered and
material used in this document is believed to be from reliable sources. The AMC however does not warrant the accuracy, reasonableness and / or completeness of
any information. We have included statements / opinions/ recommendations in this document, which contain words, or phrases such as “will”, “expect”, “should”,
“believe” and similar expressions or variations of such expressions, that are “forward looking statements”. Actual results may differ materially from those
suggested by the forward looking statements due to risk or uncertainties associated with our expectations with respect to, but not limited to, exposure to market
risks, general economic and political conditions in India and other countries globally, which have an impact on our services and / or investments, the monetary and
interest policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices etc.
The AMC (including its affiliates), the Mutual Fund, the trust and any of its officers, directors, personnel and employees, shall not liable for any loss, damage of any
nature, including but not limited to direct, indirect, punitive, special, exemplary, consequential, as also any loss of profit in any way arising from the use of this
material in any manner. The recipient alone shall be fully responsible/are liable for any decision taken on this material.
Investors are advised to consult their own legal, tax and financial advisors to determine possible tax, legal and other financial implication or consequence of
subscribing to the units of ICICI Prudential Mutual Fund.
ICICI Prudential Quant Fund
(An open ended equity scheme following Quant based investing theme.)
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