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Quant Funds

  February 19,2022

Everything that You Need to Know About Quant Mutual Funds

Artificial intelligence (AI) and Machine Learning (ML) have become a part of our daily lives. From navigation through Google Maps and social media feed, we can find the presence of AI and ML almost everywhere.

The world of investment is not far behind. The financial world has also opted for artificial intelligence to take care of the shortcomings of a human fund manager. It also helps to keep up with the upcoming changes.

Quant fund is a category of mutual fund not managed by a human fund manager. In that way, it shares its characteristics with passive funds. However, humans design the underlying selection process of these quant mutual funds.

So, different mutual fund houses can add a unique set of variables that serve their purpose best.

What is Quant Mutual Fund?

Quant fund is the short form of quantitative fund. The goal of this fund category is to decrease the impact of human mistakes on investing.

Quant funds create their portfolios by employing mathematical algorithms with basic investment principles with little human intervention. Short listing and building an investment portfolio are easier with rule-based investing. Fund managers can assess the model and, if required, make changes whenever needed.

Pros and Cons of Quant Mutual Funds

Just like every innovation, Quant Mutual Funds have pros and cons  

Pros of Quant Mutual Fund:

Cost Efficiency:Quant mutual funds are cost effective than other actively managed mutual funds.

Every mutual fund carries an expense ratio that includes various costs, including fund management fees. The price of an actively managed fund is higher as a professional fund manager looks after the fund actively. But this also adds up as costs. 

And, over a long time, the costs compound over time. So, higher the costs, better performance is required to surpass the benchmark to justify the fees.

Analyse large amounts of data:The capacity to derive insights by evaluating vast quantities of data in real-time is another benefit of quant funds.

No active involvement of fund manager:

You won't have to worry about the fund management quitting, making mistakes, or straying from the fund's goal.

Faster and effective to implement trading strategies:

Quantitative funds can also make investment choices more quickly than human managers. As a result, they may place orders more rapidly and take advantage of the narrow pricing differentials

Fund houses can use Artificial intelligence (AI) in the investing process to provide consistent, high-speed information processing and organised decision-making that the human brain may not be capable of handling.

So, AI can be far more effective in implementing trading strategies than human managers.

Cons of Quant Mutual Funds:

Increased volatility: As the triggers activate at pre-determined levels, quant funds can increase volatility during unfavourable market scenarios.

Take the same financial decision: Various quant funds may take the same decision after a particular market event. This poses a risk for the financial markets.

Should you Invest in Quant Mutual Funds?

Quant funds can perform effectively in the large cap category with deep markets and long trading history. On the other hand, these funds may not be suitable for mid-and small-cap stocks, as bottom-up stock selection still works.


Quant mutual fund is a new category of funds. Please note that these funds can also give poor results, as they are primarily reliant on previous occurrences. And, we know that past events may not necessarily repeat themselves in the future.

This blog is purely for educational purposes and not to be treated as personal advice. Mutual fund investments are subject to market risks, read all scheme-related documents carefully.

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