Delivering 4% Alpha with Scalable Risk Control

Client Overview

A leading fund house in India wanted to strengthen its investment strategy with a scalable flexi-cap portfolio framework. The client aimed to improve risk-adjusted returns, reduce volatility, and build a repeatable system for testing multiple portfolio scenarios using long-term historical data.

Problem Statement

The client needed to manage a large investment universe of over 5,500 companies, but data availability, consistency, and validation created significant execution challenges.

Key issues included:

• Difficulty sourcing and validating 20 years of historical market data
• Limited scalability in testing multiple investment strategy iterations
• High dependency on manual processes for portfolio back-testing
• Need for a faster and more reliable framework to improve future portfolio updates
• Requirement to improve risk-adjusted returns while maintaining volatility control

For leadership, the challenge was not only generating alpha but building a scalable, repeatable, and governance-ready investment research architecture.

Solution Provided

Decimal Point Analytics developed an automated back-testing engine designed to process large volumes of historical data efficiently and support rapid portfolio strategy testing.

The solution included:

• Automated data processing framework for efficient back-testing
• Quality, Growth, and Value factor model with multiple sub-factors
• Reliable alternatives and derived metrics to address data gaps
• Rapid testing capability for 50+ portfolio iterations
• Scalable architecture to support future strategy updates and portfolio refinements

This enabled the client to move from a manual, time-intensive process to a structured and repeatable investment strategy testing framework.

Outcome

The solution helped the client improve portfolio performance, risk control, and execution speed.

Key outcomes included:

• Delivered 4% annualized alpha through optimized portfolio construction
• Mobilized approximately ₹2,000 crore in the debut fund
• Reduced beta from approximately 1.5 to 1.07, improving risk control
• Decreased volatility from approximately 33% to 18%
• Improved Sharpe and Treynor ratios compared to benchmark
• Reduced back-testing runtime from 8 hours to 30 minutes
• Built a scalable architecture for future portfolio strategy updates

Key Takeaway

For asset managers, alpha generation is no longer driven by research depth alone. Scalable data infrastructure, automated back-testing, and factor-based portfolio intelligence are becoming critical to building strategies that are faster, more resilient, and better aligned with risk-adjusted performance goals.

Explore how Decimal Point Analytics helps investment managers build scalable, data-driven portfolio strategies with stronger risk control and faster decision-making.