Quant Mutual Fund net equity outflow at Rs 1,398 crore or 1.5% of AUM post SEBI front-running probe

Quant MF faced a SEBI probe on suspicion of front running.

Sandeep Tandon's Quant Mutual Fund has seen net equity outflows worth Rs 1,398 crore since SEBI's front running investigation on the fastest growing fund house in India, it said in a call with investors on June 26.

Earlier this week, Moneycontrol reported that market regulator Securities and Exchange Board of India has conducted a search and seizure operation on Quant Mutual Fund on suspected front-running.

Quant has total assets under management (AUM) estimated at about Rs 90,000 crore across 21 mutual fund schemes. It runs the third largest small-cap fund in the country with assets under management of Rs 20,000 crore.

This fueled concerns around the fund’s midcap and smallcap holdings and its liquidity profile, in case it faces larger redemptions than the normal-case provisions.

Also read: Quant MF escapes panic redemptions | Investment advisors are suggesting to stay invested in Quant Mutual Fund schemes, and investors are adopting a wait-and-watch approach with respect to their investments.

On the call today, Quant Mutual Fund founder and CIO Sandeep Tandon sought to assuage investor concerns, and said the fund's portfolio is fairly liquid. The fund has moved from  midcaps to large caps, and from illiquid to liquid strategy over the past few months, he said.

Tandon added that there have been no "alarming redemptions" over the last three days. Tandon's presentation mentioned that while gross inflows still remain normal, gross outflows have increased.

Also read: 14 stocks where Quant MF is the lone mutual fund investor

Earlier this week, Fisdom Research said in a note that Quant MF has a strong SIP book, diversified assets managed across a large number of investors, and highly liquid large cap stock holdings to shield it against a run on the fund.

The research firm recommended the longer term equity investors, including SIP / STP investors to continue to hold on to existing investments.

Interestingly, while Quant MF came under spotlight for its unique selection of stocks that are not picked by other asset managers, Fisdom noted that such holdings are not large enough to cause any significant redemption pressure on the fund.

Quant’s latest liquidity stress test showed the fund house would require 28 days to liquidate 50 percent of its Small Cap Fund portfolio, and 14 days for 25 percent of the same. On the Quant Mid Cap Fund, the liquidation is pegged at 9 days for 50 percent, and 5 days for 25 percent of the portfolio. The fund house has 28 percent of its portfolio held in liquid large cap stocks in the Small Cap Fund, and 27.4 percent in the Mid Cap Fund.

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