Bandhan MF’s BAF is moving from a single factor model that looked only at trailing PE to a multi parameter driven model that will consider valuations, fundamentals and market technicals in determining net equity allocation. Some of the new factors include credit spreads, real returns, currency movements and market volatility (VIX).
This is not a quant driven model with designated weights –it is a set of variables which will collectively influence net equity allocation. When all parameters are aligned in one direction, there is much higher conviction in the allocation decision.
Sachin says Bandhan BAF’s new approach does not dwell on the pro vs counter cyclical debate in the industry. It focuses on delivering on an investor mandate that seeks downside protection in market downturns and healthy participation in market upturns, thereby offering a smoother investment journey.
Stock selection is governed by a 5-filter framework, which tends to lean more towards quality and growth.
The new framework will be able to catch big market trend changes more nimbly than the existing single factor model. The fund has lagged on performance and Sachin says he remains focused on enhancing investor outcomes – especially in terms of delivering healthy risk-adjusted returns.