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Tata Mutual Fund has launched 'Tata Quant Fund', an artificial intelligence (AI) and machine learning (ML)-powered fund using a proprietary quant framework.
It will combine multiple rule engines and predictive models to create investment portfolios that are aimed at maximising returns during up-trend markets and minimising losses during down trend.
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 of 30 stocks.
Thereafter, the machine language powered predictive algorithms decide basis prevailing market and macro-economic conditions, a portfolio that is likely to outperform during the next month. Long position in selected portfolio is taken only for months where predicted return is positive.
During months when negative returns are predicted, the strategy uses derivatives to hedge the gross long equity position held previously.
The Tata Quant Fund portfolios are rebalanced monthly for optimal performance at low risks.
The predictive engine uses the market and macro-economic data collected over the last 20 years 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 machine learning predictive models also recalibrate and re-adjust at a fixed periodicity by using new and incremental data.
Prathit Bhobe, Managing Director (MD), Tata Asset Management said computers are powerful enough to solve problems, a lot of data is available and fund house will strive to use this data in combination with algorithms to its best.
In last 18 months, he said Tata Mutual Fund has repositioned as a full service fund house and launched series of new fund offers to fill in the white space.
In fact, when Tata Mutual Fund launched arbitrage fund in November there was no big difference to the similar product available in market but still it mopped up Rs 80 crore. Today, he said the same arbitrage fund has an asset under management of Rs 450 crore.
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