Sandeep Tandon on stress test, liquidity & why Quant takes concentrated bets

economictimes.indiatimes.com:

Sandeep Tandon, CIO, Quant MF, says “if we start looking at risk-adjusted returns, it will be far better. Just looking at PE in isolation without looking at ROC or ROE does not make sense. Similarly, just looking at a few risk measures in isolation does not make sense and that is the reason in our disclosure we have added additional data points also which are risk-adjusted measures and more meaningful rather than just looking at unidirectional risk numbers.”

Tandon further says Quant takes concentrated bets because he believes that extraordinary diversification from a mathematical perspective means there is no control on risk.
First, let us talk about the stress test. What has been the conclusion at Quant and what has been your finding?
Sandeep Tandon: Let me explain the larger thesis. What the regulator wants from us is that we should disclose our liquidity position, our risk-related data points, our concentration in the large, mid, or even concentration from a client perspective. I think it is a good exercise from a larger perspective, more from a transparency point of view.

But if you really look at the way Sebi has defined it in terms of liquidity or stress test, whatever they are calling it, it is very conservative. They have taken a very conservative approach that you can only sell 10% of the portfolio in a day. In that background also, our scores have been pretty good. We look at the liquidity analytics very closely. We track liquidity analytics not only from India, but also global perspectives.

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