Samco MF to ‘stress test’ stocks before investing

Samco Asset Management Company (AMC) on Tuesday said it will use a ‘stress test’ strategy for picking stocks. The digital discount broker last month obtained Securities and Exchange Board of India’s (Sebi’s) approval to foray into the mutual fund (MF) industry.

Samco AMC will initially launch a flexi-cap scheme followed by a global active fund and an equity-linked saving scheme (ELSS).

The fund house said each company will be put through six rigorous tests defined by its proprietary Hexashield framework. Only businesses that pass that test will be part of its investable universe.

Some of the tests include cash flow stress tests, balance sheet and debt stress tests, and regulatory stress tests. According to Samco MF most listed companies end up failing the stress test.

The fund house said only 15 of the 50 Nifty components have passed its stress test. Among other innovations, Samco will ensure its schemes will be “truly” actively managed and it will make daily disclosures around this.

“The world of asset management is going through various disruptions. Samco aims to be at the forefront of leading disruptions in the active segment. We will build funds with high (actively managed) shares so that cost conscious investors get a truly active fund and not a closet index fund,” said Jimeet Modi, founder and director of Samco AMC.