Franklin Templeton India Launches New Multi-Factor Equity Fund

Franklin Templeton India has launched the Franklin India Multi-Factor Fund (FIMF), an open-ended equity scheme designed to pursue long-term capital appreciation through a data-driven, quantitative investment strategy. The New Fund Offer (NFO) period is from November 10 to November 24, 2023, with an issue price of ₹10 per unit. The fund will invest in equity and equity-related instruments of companies within India's top 500 by market capitalisation.\n\nThe investment approach utilizes a proprietary model incorporating four key factors: Quality, Value, Sentiment, and Alternatives (QVSA). This model evaluates over 40 quantitative and qualitative indicators to select stocks. The strategy also integrates risk management techniques to rebalance exposure across sectors, company sizes, and investment styles, aiming to minimize downside volatility and enhance diversification.\n\nAvinash Satwalekar, President, Franklin Templeton–India, highlighted that the fund combines advanced technology and data analytics with human oversight, reflecting modern investment management trends. Adam Petryk, Executive Vice President and Head of Franklin Templeton Investment Solutions, noted the fund benefits from a global quantitative investments team managing over $98 billion. Fund manager Arihant Jain stated that the systematic, rules-based approach leverages multiple investment styles to capture strengths and reduce risks associated with single-style investing.\n\nThe fund's benchmark is the BSE 200 Total Return Index (TRI). The minimum investment during the NFO is ₹5,000, with subsequent investments starting at ₹1,000. An exit load of 0.5% applies to redemptions within one year of investment.\n\nImpact\nThis launch introduces a sophisticated quantitative strategy to a wider Indian investor base, potentially influencing investment trends towards data-driven approaches. It offers investors an alternative to traditional stock selection methods and may attract those seeking diversified, systematically managed equity exposure. The fund's performance will be closely watched as a gauge of quantitative investing's success in the Indian market.\nRating: 7/10\n\nDifficult Terms:\nOpen-ended equity scheme: A type of mutual fund that allows investors to buy and sell units continuously. It primarily invests in stocks.\nMulti-factor, quantitative investment strategy: An investment approach that uses mathematical models and data analysis to select investments based on multiple predefined criteria or 'factors' (e.g., quality, value).\nNew Fund Offer (NFO): The period during which a newly launched mutual fund scheme is available for investors to purchase units at its initial price.\nMarket capitalisation: The total value of a company's outstanding shares in the stock market.\nProprietary model: A unique investment model developed and owned by a specific financial institution.\nQVSA model (Quality, Value, Sentiment, Alternatives): The specific set of four factors Franklin Templeton India's fund uses to evaluate and select stocks.\nQuantitative indicators: Measurable data points used in financial analysis, like price-to-earnings ratios or revenue growth.\nQualitative indicators: Non-numerical factors that assess a company's potential, such as management quality or brand strength.\nDownside volatility: The tendency for an investment's value to decrease, measured by how much it fluctuates downwards.\nDiversification: Spreading investments across various assets to reduce overall risk.\nQuantitative modelling: The use of mathematical and statistical techniques to analyze financial data and predict market movements.\nSystematic, rules-based approach: An investment process that follows a predefined set of rules and criteria, minimizing subjective decision-making.\nBenchmark: A standard index used to compare the performance of an investment fund.\nTotal Return Index (TRI): An index that reflects the total return of its constituents, including price changes and reinvested dividends.\nExit load: A fee charged when an investor redeems their mutual fund units before a specified time period, typically to discourage short-term trading.