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Sandeep Tandon, founder and CIO of Quant Mutual Fund, seems to have mastered the art of alpha generation. His firm has been able to make optimum use of analytics to unlock value for investors. Its six schemes have delivered more than 100% return to investors in the past one year.  With a rally of around 212%, Quant Small Cap has emerged as the top gainer among all the equity mutual funds. His other funds including Quant Active, Quant Consumption, Quant Infrastructure, Quant Midcap and Quant Tax have also gained between 100%-153% during the same period.

Tandon’s day usually starts early in the morning by analysing the Quant Risk Index, a metric that encapsulates risk across markets, geographies and assets classes. He then moves on to study global macros and decipher any meaningful changes. The money manager and his investment team sit each morning and strategise a plan for the day. During market hours, they try to execute that plan efficiently.

Money9 caught up with Tandon to know more about his journey and strategies.

Edited excerpts:

Q: How have you managed to deliver robust alpha to your investors? 

Tandon: At Quant, we believe that we are in the business of risk management of which returns are a by-product. Our investment philosophy of active, absolute, unconstrained coupled with dynamic money management, predictive analytics, multi-dimensional research and distinct VLRT investment framework have enabled us to identify the right sectors and securities at their inflection points, thus, endeavouring to deliver superior risk-adjusted returns.

VLRT, is a combination of four elements, namely: valuation analytics, liquidity analytics, risk appetite analytics and timing. Traditionally, most money managers have based their decisions solely on valuations. However, with our framework’s inclusion of the latter elements (liquidity and risk appetite) we’re able to practice dynamic money management and deliver superior risk-adjusted returns.

Our analysis is macro in nature, wherein, we track global liquidity and risk appetite and apply proprietary predictive analytics tools to determine whether it is a risk on or risk-off environment. This helps us to gauge the fear or greed of an asset class, region, sector or a particular stock. Our blended approach has helped our schemes to continually outperform their respective benchmarks.

Q: What gives you the confidence to hold on to stocks that have turned into multibaggers?

Tandon: Quant is a data-driven firm. We quantify every investment opportunity and aim to remain unbiased with regards to an investment opportunity. If our data and analytics indicate that we should make an investment, we will do so. Likewise, if our data is unsupportive of an investment, we will not go ahead with it. We have also developed a suite of predictive analytics tools that have the ability to quantify market sentiments. These tools are vital to our decision-making process and aid in the identification of inflection points; thus, help us in staying ahead of the curve.

Q: What are the lessons you have learnt from mistakes in the past?

Tandon: We all live in a dynamic investment world and manage multidimensional data keeps on evolving and therefore failures are monitored on a continuous basis and systems are modified on a dynamic basis. The most important lesson is not to repeat the same mistake again but as human being, we will make new mistakes and rectification of the same is an ongoing process.

Q: What are your hobbies?

Tandon: My hobbies include listening to music – Ghazals and old Hindi songs in particular. I am also an ardent practitioner of meditation. It refreshes my mind and helps me focus better. Lastly, I enjoy spending time with my family and my dog Zeenia, they are my pillars of strength and my stress-busters.

Q: Do you follow any investment guru and which books are you reading currently?

Tandon: As a student of behavioural finance, I generally read and track global macros via various articles and news items on a regular basis as this approach is more effective and pragmatic, rather focusing on any specific types of books of gurus.

Q: What would be your advice to an individual investor?

Tandon: Learn from your own mistakes and do not repeat the same mistakes. One should remain humble as over-confidence is the biggest enemy.

Q: What is the AUM size of Quant MF?

Tandon: When we acquired Escorts Mutual Fund in mid-2018 (which we then re-branded to Quant Mutual Fund), the asset under management (AUM) was around Rs 180 crore, of which, equity schemes had an AUM of about Rs 45 crore. Since then, our AUM has grown by a staggering 855% and is now in excess of Rs 1,770 crore. The equity portion has grown even more significantly. Our AUM for equity-based schemes now stands at over Rs 1,400 crore, representing a growth of over 3000%.