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ViniyogIndia☔ All Weather Portfolio

Background:

ViniyogIndia offers model portfolios based on Quantitative Factor Investing. Factors are quantitative attributes used to explain asset returns.

Factor strategies have been extensively researched globally as well as in India. The below chart for example, summarizes the risk-return characteristics of single-factor portfolios in India between October 2005 and June 2017.

Over the period, all major single-factor portfolios outperformed the S&P LargeMidCap. However, only Low Volatility, Quality & Momentum delivered better risk-adjusted returns (returns per unit of risk) than S&P BSE LargeMidCap.

factor investing in india

Source: S&P Dow Jones Indices LLC. Data from October 2005 to June 2017. Index performance based on total return in INR. Past performance is no guarantee of future results

ViniyogIndia’s factor portfolios use a combination of factors that are proven to work well in the Indian markets.

Stocks & Weights

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Portfolio Design Rules

ViniyogIndia ☔ All Weather Portfolio is based on a Multifactor Strategy that uses Low Volatility as one of the Primary Factors

  • Portfolio of 15-20 stocks picked from the NSE universe having the lowest historical volatility
  • Historical volatility is measured as the standard deviation of daily returns over the past year
  • Further refined by using a combination of one or more secondary factors to maximize risk-adjusted returns
  • Illiquidity filter to remove low volume| turnover stocks
  • Balanced at least once a month to keep the turnover low

Risk Management Rules

Risk exposure to the overall portfolio is reduced by:

  • Proprietary asset allocation rule to control equity exposure depending on market conditions
  • Limits on exposure to any single stock
  • Conservative nature of the factor combination used to reduce downside risks

Asset Allocation Rules

Allocation to Equities is based on a proprietary mathematical function that uses market parameter(s) as the independent variable(s). Excess funds are allocated to Liquid & Gold ETFs.

Suitability

This portfolio is suitable for conservative to moderately aggressive investors

Historical Returns

ViniyogIndia All Weather Historical Chart
Back-tested returns, ViniyogIndia ☔ All Weather Vs Nifty500. Past performance are not a guarantee of future returns.
YearN500 PNLStrategy PNL
200534.56%52.78%
200631.74%36.86%
200765.35%57.17%
2008-56.74%-21.71%
200981.86%80.24%
201013.13%30.20%
2011-27.42%-5.00%
201228.37%23.16%
20131.64%8.54%
201439.64%66.61%
2015-0.90%1.60%
20163.39%14.15%
201734.75%29.08%
2018-2.63%-4.24%
20198.45%3.03%
202015.33%48.27%
202128.23%70.79%
CAGR13.10%26.06%

Based on the back-tested results, between 2005 – 2021, the All Weather strategy generated a compounded rate of return of 26.1% compared to Nifty500 return of 13.1%.

Further, strategy had a significantly reduced drawdown, with worst year return of 21.7% compared to 56.7% for Nifty500.

Attribution Analysis

To interpret the sources of return for our strategy we perform a regression analysis using Carhart 4 Factor Model. The results are shown in the table below:

 α *MKTSMBHMLWML
Factor premia0.860.490.070.040.31
p-value0.00~0.00.220.41~0.0

The monthly alpha or excess return for the strategy is 0.86%. This is generated using a combination of factors and asset allocation rules that tries enhance portfolio returns while reducing risks.

Additionally, returns from standard factors such as market beta and momentum contribute to the overall portfolio returns. Return from size and value factors are not statistically significant.

ViniyogIndia ☔ All Weather smallcase by ViniyogIndia

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