Deepak Shenoy, once a software engineer, has turned his passion for the stock market into a full-time career. Shenoy, who began as a stock enthusiast, eventually became a fund manager and now, after receiving approval from SEBI, is set to launch his own mutual fund. The founder and CEO of Capitalmind Financial Services, he has taken an interesting journey from the tech world to the financial sector, gaining notable success in managing assets worth over Rs 2,200 crore.
From Software Engineer to Fund Manager
Shenoy’s story stands out among many professionals who have shifted their careers due to their growing interest in stocks and investments. His transition from a software engineer to a full-time fund manager shows how passion can drive major career shifts. The journey began in 2009 when Shenoy launched an investment blog called Indian Investors Blog, which was the starting point for his current firm, Capitalmind. Today, Capitalmind handles over Rs 2,200 crore in assets for about 1,300 clients. The company follows a unique quantitative investment strategy, which Shenoy will also use in his upcoming mutual fund.
The Quantitative Investment Strategy: Data-Driven Decisions
One of the key aspects of Shenoy’s success is his use of a quantitative investment strategy. This strategy focuses on data analysis and algorithms to make investment decisions. Unlike traditional methods, where a fund manager actively picks stocks, the quant strategy is automated. It relies on specific algorithms designed to analyze data based on factors like growth, profitability, value, and quality.
These algorithms are tested over different time frames to ensure they work across market conditions. The final result is a selected set of stocks for investment. Shenoy believes that this strategy reduces human error and dependency on fund managers, making it more efficient in the long run.
What Is Quant Investing?
Quantitative investment, or quant investing, involves using mathematical models and statistical methods to identify the best investment opportunities. Globally, the quant fund market is expected to reach $31 trillion by 2031, up from $16 trillion in 2023. In India, active quant mutual funds are also gaining popularity. By the end of August 2023, the assets under management (AUM) of quant mutual funds exceeded Rs 9,000 crore, a significant jump from Rs 300 crore in 2020. The number of quant schemes in India has also increased from 3 to 10 in this time.
Capitalmind’s No Performance Fee Approach
One of the unique aspects of Capitalmind is its fee structure. Shenoy has ensured that his portfolio management service (PMS) operates differently from others. While many PMS providers charge performance fees in addition to management fees, Capitalmind only charges management fees. This is similar to how mutual funds work, where investors only pay an expense ratio. Shenoy’s approach aims to be more transparent and affordable for investors, which has contributed to Capitalmind’s success.
The Benefits of a Quant Strategy
Shenoy emphasizes the benefits of using a quantitative strategy. By reducing human involvement in decision-making, the strategy can function effectively without constant oversight from a fund manager. Shenoy pointed out that one of the challenges in traditional funds is the potential for performance to dip when a fund manager leaves. In contrast, the quant strategy continues to operate smoothly, as it’s based on data and algorithms, not individual judgment. Another advantage is the lower cost. Since the strategy doesn’t rely heavily on a fund manager, fees are generally lower, making it a more cost-effective option for investors.
With SEBI’s approval in hand, Deepak Shenoy is now gearing up to launch his mutual fund, which promises to bring his successful quantitative approach to a wider range of investors.
