Systematic Active Equity Investment Explained

This is similar to how Systematic Active Equity (SAE) works in investing.

Instead of taking investment decisions relying solely on traditional data like company balance sheets and quarterly reports for creating the optimum portfolio, SAE combines vast amounts of data from multiple different sources. Just like the car’s GPS is relentlessly seeking to optimize your route, SAE processes signals from traditional data alongside alternative data sources like social media, market sentiment, and even employee reviews, to paint a more comprehensive picture of a company.

Much like a skilled driver who adapts to road conditions, it’s the experienced fund managers who turn these SAE insights into action. They use the data and technology to adjust the portfolio, optimize returns, and review risks to seek the best routes for your investments. In a nutshell, SAE can be the perfect combination of human expertise, data, technology and machine learning, coming together to help your investments grow while managing risks.

Why SAE makes sense for today’s world. Over the past decade, the Indian investment landscape has undergone a dramatic transformation, with both the depth and breadth of the market increasing significantly. Ten years ago in India, fund managers could make well-informed investment decisions by looking at financial statements, few published news articles, and company reports. Today, however with thousands of stocks available in India and the explosion of alternative datasets, a traditional approach may no longer be comprehensive. Recognizing this shift, we bring Systematic Active Equity (SAE)—a technologically driven investment process designed to aid fund managers in harnessing this vast ocean of information and delivering actionable insights for the future.

SAE aims to deliver consistent outcomes. The SAE approach intends to work by taking small exposures in numerous stocks as against taking large exposures in selective stocks, relative to the benchmark. This diversified approach aims to build stable and resilient investment portfolios, as the concentration risk of holding only a few stocks is reduced. Incorporating a variety of assets also allows investors to benefit from diverse market opportunities, enhancing potential returns while maintaining a balanced risk profile.

How does SAE tackle Human Biases? One of the biggest challenges in traditional mutual fund management is the potential for fund manager’s biases to creep into the portfolio. Every fund manager brings their unique style and experience to the table, but this can sometimes lead to decisions that are influenced by personal preferences or past experiences, rather than potential for future returns. However, with Systematic Active Equity (SAE), these biases are significantly reduced, thanks to the powerful combination of big data, data science, and deep human expertise.

Another advantage? There’s no risk of disruption if the fund manager changes jobs. With SAE, even if a new fund manager steps in, the technology and data remain intact, ensuring continuity in the investment process. It’s like having a new driver in the same car—equipped with the same powerful GPS - making sure the journey remains smooth and on track, no matter who’s behind the wheel.

Impact on Indian Investors. The introduction of SAE to Indian investment landscape represents a significant milestone in India's evolving economy. The demand for efficient, scalable, and progressive investment approaches remains crucial. Using the combined strengths of data driven algorithms, machine precision and human expertise to seek to deliver a comprehensive investment approach is truly unique to the Indian market. This approach aligns with the dynamic nature of contemporary markets, providing investors with access to global expertise and tailored insights designed to help meet their financial objectives.

Bottom Line We are introducing Systematic Active Equity (SAE) investing in India for the first time. This approach aims to make investing smarter, more accessible, and more efficient. Investing involves both intuition and precision. SAE combines human expertise with advanced data analysis and machine learning to identify opportunities that may otherwise be overlooked.

Disclaimers

*The systematic approach involves utilizing inputs from the Fund Managers and signal research scores shared by BlackRock Inc. Such signal research scores are derived using big data (which includes traditional data and alternative data), and leverages machine learning, a form of artificial intelligence and advanced data analytics, which are constantly being improved. Signals are selected based on their economic rationale and demonstrated statistical relevance.

This document is for informational purposes only and does not constitute investment advice or constitute an offer or solicitation to sell or buy any securities. This document is for intended recipients only. The views expressed herein are based on internal data, publicly available information and other sources believed to be reliable. The document does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. There is no assurance that any investment strategy or Scheme will achieve its objectives or avoid losses. Certain statements in this document may contain forward-looking information, including projections, estimates, and other statements regarding future events or the future financial performance of the Scheme. These statements are based on current expectations and assumptions and actual results may differ materially due to various risks and uncertainties. The value of investments may fluctuate and there is no assurance or guarantee that the investment objectives of the Scheme will be achieved. Past performance of the sponsors, asset management company or any Scheme of the fund does not guarantee or indicate future results/returns. Neither the AMC, Trustee Company, sponsors or its affiliates nor any person connected with them shall accept any liability arising from the use of this document.

Investors are advised to read all scheme-related documents carefully before investing. Investment in mutual funds involves risks, including the possible loss of principal.

The recipient(s) before acting on any information herein should make his/her/their own investigation and seek appropriate professional advice and shall alone be fully responsible / liable for any decision taken on the basis of information contained herein.

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