A mysterious little fund topped India’s MF charts last year, here’s why

MUMBAI : With a 206% return over the past year, Quant Small Cap Fund has been the top performer among all equity mutual funds in India during that time period. The fund as well as the fund house itself are not well known to Indian mutual fund investors and distributors and therefore it is important to understand its background for potential investors. The Quant Small Cap Fund has not always performed very well, falling significantly behind its benchmark and its peers in 2019 and showing uneven performance in previous years. The fund house itself changed hands in 2018, making past returns less important. The new management also made major changes to the investment process and staff. mint Explain.

What was once Escorts Mutual Fund became Quant Mutual Fund following the acquisition of the asset management company by Quant Capital, a mutual fund brokerage and distribution company in 2018. Led by Sandeep Tandon, Quant Capital was doing previously part of Reliance Securities, owned by Anil Ambani. The MF escorts had Assets Under Management (AUM) of ₹235 crore at the time of acquisition. Powered by recent performance, this AUM has skyrocketed ₹1855 crore according to its national sales manager with the fund house adding assets of around ₹600 crore ₹700 crore in the last month alone.

Quant Mutual Fund says it follows a “VLRT” strategy, analyzing valuation, liquidity, risk and timing. In practice, this has resulted in a high turnover rate (a high churn rate in the portfolio with stocks frequently bought and sold). “If you see the portfolios of the Quant patterns, you will observe an extremely high portfolio turnover rate, sometimes in the range of 500 to 600%. This indicates that the patterns are more frequent, characterized by opportunistic bets rather than a The small size also makes them vulnerable to possible large outflows. For these two reasons, they have not yet entered our investment radar, “said Vidya Bala, co-founder of Prime Investor. However, the fund house considers that the churn rate is inherent in its strategy. “We place more importance on liquidity and general market sentiment (risk on or off) than on valuations. Our portfolios have a high turnover rate for this reason, but it is also the reason for our high returns, “said Anupam Saxena, Head of National Sales. Director, Quant Mutual Fund. Quant Tax Plan, another program run by fund house, also achieved a strong performance of 131.5%, outperforming the benchmark and the category. Stocks such as Fortis Healthcare and Stylam Industries occupy significant stakes in the portfolios of both regimes, but given Due to the high turnover strategy used by the fund house, individual holdings may not matter much.

“Coming to India, the Quant greed indicator peaked in January 2008 for the 30 Most Admired Stocks, a significant portion of the Indian stock market. In addition, our risk appetite and liquidity indicators for India have minor weaknesses. Therefore, we are taking a cautious line in the short term and believe that a buy-to-bottom strategy will remain effective both in the medium and long term, ”the outlook note on the AMC website for May states. 2021. “Right now we are in risk-free mode, with a lot of our plans in cash and we have turned to defensive stocks such as pharma rather than cyclical stocks,” added Saxena. Investors rushing to invest in search of recent returns should take into account the strategy and approach of the AMC.

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