The death of stock-picking? Why smart investors are shifting to factor-based, quant strategies
As traditional alpha fades, Karan Aggarwal, Co-founder & CIO of Elever PMS reveals why India is following the global shift toward quant-driven, rule-based strategies and how Elever is leading the charge
With over $8B in assets tracking his work, karan’s key learnings are:
Stock picking woes
As markets mature the world over, traditional stock-picking methods struggle. Over decades, 90% US of large & mid-cap funds have underperformed the S&P. Passive equity fund assets have surged from 20% in 2010 to 60% today, while active funds have lost $2T in outflows over the last decade.
Factor focus surge
US Portfolios are shifting from mutual funds to index ETFs and rule-based factor funds. By the 2010s, new factors like volatility, quality, and momentum emerged. As markets grew more efficient, and active alpha rapidly faded, US investors moved toward quant-based strategies for consistent returns.
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Dive deep into how these learnings translate into Elever’s core pillars that disrupt traditional investing like never before.
“Nobody talks about it, but alpha is disappearing from traditional investing. It’s a pattern seen worldwide—and India is next.”
- Karan Aggarwal, Co-founder & CIO @ Elever.
What is traditional investing, and why has it not worked in mature markets like US, Europe, etc?
Karan: Traditional investing exploits pricing anomalies through stock research & information asymmetry, but as markets grew more efficient, these opportunities vanished.
And you think this is happening in India now?
Karan: Very much so. Since the launch of Nifty BeES in 2001, we have witnessed a significant rise in index funds and ETFs. Large-cap alpha faded by the 2010s, mid-caps are following suit, and soon, stock pickers will have to look beyond the top 300 companies to find opportunities.
So, how does your factor-focused, rule-based approach solve for this and help in alpha creation?
Karan: Factor investing standardizes stock selection by focusing on proven drivers of returns like Quality, Value, and Momentum. So, unlike traditional stock-picking, we rank and rotate stocks based on factor strength, ensuring consistent exposure to winning factors. And in my experience of creating products for global ETF sponsors and hedge funds, I have seen these validated. Factor strategies have outperformed benchmarks over long periods. Even in India, NSE's factor indices have shown similar success, making them a smarter, risk-aligned alternative to traditional investing. A smart approach is the core-satellite model—60-80% in index funds and 20-40% in quant-based factor strategies for more reliable alpha.