Rule-Based active investing or smart beta strategies rely on a different kind of expert - Financial Data Scientists. These experts bring to the table the market experience with cutting edge technology to formulate, validate and implement rules in a disciplined manner. The technology used for analysis has become increasingly powerful with time. As a result, Rule-Based active investment techniques have become more sophisticated and precise. One of the most successful of these techniques is factor investing. ...
Availability of credible primary data is the dominant limitation, and even when data is available, much effort is needed to transform it for efficient use. Data is needed both across time and breadth. If long period data is available for a narrow set of stocks, it isn't enough. If data is available for a large amount of stocks but for a short period, it isn't enough as well. With both availability and quality in place, data tends to be very large in size. Analysing it needs the latest technology, both hardware and software. With all these facilities in place, the final ingredient is time. There are no shortcuts.
Financial data scientists at NJ have been developing the datasets necessary for meaningful and efficient analysis over the past three years. We, at NJ have the expertise to navigate the entire development and implementation cycle without any external dependency.
Factor investing relies on the identification and measurement of time tested metrics that contribute positively to stock price performance.
Factor metrics like Quality, Value, Momentum and Low Volatility have proved to be the most effective and efficient. Size has worked in developed markets but Liquidity in developing markets isn't supportive. Parameters to measure each of these factors are devised and validated. Rules based on these parameters are tested to determine their efficacy across time, breadth and geography. Viable rules are then tested with each other to determine compatibility and cohesiveness. Harmonious rules are combined to form a protocol that governs investments. This protocol is followed without any exceptions and discretion.
At NJ Mutual Fund, we follow a 'Rule-Based Active Investing' philosophy and are led by data driven expertise.
The Investment Team endeavors to achieve it's fund objective with this three step approach:
Put to use time tested factor based rules to identify stocks which show potential to deliver superior returns.
Leverage financial data and balance sheet information, in addition to business responsibility reports & ESG scorecards, to eliminate companies which have the potential to significantly destroy wealth.
Finally, based on the correlation between identified stocks, their volatility and expected returns, we will use sophisticated tools to create optimal portfolio weights for each stock in the portfolio.
The aim is to simplify the investing process for
our Partners and Investors through a ‘Rule-Based Active Investing’ fund management style that reduces human bias.