World over, quantitative fund management models that identify trends and use them to make investment decisions have been gaining popularity; and India is no exception. Already, investors have found a few quant-funds, as they are popularly called, coming their way. A latest offering from Lotus India Mutual Fund, the Agile Tax Saver fund, however, is an ELSS fund where the investments will be eligible for a tax deduction under Section 80C of up to a maximum of Rs 1 lakh.
This quant fund will allocate and re-allocate assets, if necessary on a monthly basis, after identifying new trends in the market. Earlier too, Lotus India introduced an Agile Saver fund that closed for subscription only recently. In both the newly introduced quant funds, AGILE is an acronym for Alpha Generated from Industry Leader’s Fund.
The Agile Tax-Saver
The model-based fund manager will make the investing decisions.
- Opened: November 15, 2007
- Closes: February 15, 2007
- Tenure: 10-year closed-end fund
- Fund Manager: Mathematical model to decide fund allocations
Tax benefits: Tax benefits u/s 80C with lock-in
Fund managers try to generate Alpha, which essentially means out-performance, by investing in stocks that beat the market or rise faster than the market. The AGILE Tax Saver Fund will invest in the same stocks as the AGILE Saver Fund with no difference in the asset allocation mix, but the target audience for the tax saver funds are longterm investors looking for tax saving. “We are just targeting different segments of investors," says Rajiv Shastri, Head, Business Development and Strategic Initiatives, Lotus India AMC.
The ELSS AGILE Tax Fund is a close-ended scheme for 10 years, with a lock in period of three years. However, if you withdraw after a three-year period, the remaining unamortised issue expenses will be deducted from your redemption proceeds. Nevertheless, the AGILE Tax Saver works out easier on the purse—with tax benefits and absence of loads over a 10-year period. This fund, like its predecessor, will invest 9 per cent of the corpus in 11 stocks and 1 per cent will be kept for the money market instruments.
The stocks are picked based on their large market capitalisation, easy liquidity and minimum float. Tax saver funds eliminate concerns of fund manager movements as it does not require discretionary investing. However, quant models have yet to be tested in real market conditions. You can wait till February for cues on the first AGILE Saver fund’s performance before you invest in the Tax Saver fund. There’s a caveat, though: three months may not really bring out the best out of the quant fund.