Quant Mutual Fund underperforms over the past three months, says portfolio skewed towards risk-off sentiment

Since 2020, Quant has launched 16 mutual fund schemes in less than four years.

Quant Mutual Fund, which has emerged as the fastest growing AMC in the country backed by strong outperformance, has seen its performance slip in recent months, even as it faced search and seizure operations by the capital market regulator as part of its investigation.

Over the last three months, 19 out of 27 of Quant's mutual fund schemes underperformed their respective benchmarks. In comparison, only two of Quant's 22 funds failed to beat the benchmark (five funds were added over the past 12 months), over the past one year.

"One can’t really read too much into short-term returns. Returns would depend on the stocks and sectors held in the portfolio. Quant Mutual actively shuffles stocks based on their investment process. Sometimes the stock bets may take longer to fructify and sometimes those may not even work," said Amol Joshi, Founder, PlanRupee Investment Services.

In the September fund update, the fund noted that it is taking a defensive posture. "In light of perceived risks (USD Index rally) and unknown risks (geopolitical risk), since the past three months the construct of our quant MF portfolios are more skewed towards a mild risk-off environment and liquid and defensive stocks as the impact cost is rising," explained the fund house.

As of August 30, Quant’s Small-cap Fund, the largest in its kitty with assets under management of Rs 25,535 crore had about 16% in cash and money markets instruments. 84% of the corpus was deployed in equities, and 66% in small-caps. However, the fund’s top holdings were Reliance Industries (9.73%) and Jio Financial Services (4.59%).

"Quant MF could be cautious on the market. Maybe they are in that risk off mode right now, which is why they have increased their large-cap exposure across their portfolios. Other small-cap fund managers are also keeping an increased cash level in their portfolios," said Shweta Rajani, Head of Mutual Funds, Anand Rathi Wealth.

She added that if somebody was at an average 6 percent cash earlier, now they are possibly holding around 8 or 9 percent cash, waiting for an opportunity to deploy. There is a general expectation that there could be an correction soon, which would give them the chance to deploy.

Quant’s September note also said that market corrections will offer excellent long term wealth building opportunities supported by strong fundamentals and improving corporate performance. "Our medium term outlook is constructive and sector rotation will play a key role while our long term outlook is bullish with a buy-on-dips strategy," it added.

In a stark deviation from most traditional fund managers' long-term approach, the Sandeep Tandon-led fund house believes in a high churn rate. "Portfolio turnover ratio is an irrelevant measure because whether the portfolio turnover is high or low does not inherently provide meaningful information about the portfolio's ability to generate returns or manage risk," said Quant MF's September factsheet.

On June 23, Moneycontrol exclusively reported that the capital market regulator Sebi conducted search and seizure operations on Sandeep Tandon-owned Quant Mutual Fund, as part of a probe by the regulator.

From 1996 to 2008, the fund house launched 11 funds. However, since 2020, Quant has followed up, launching 16 mutual fund schemes in less than four years. Out of 27 funds, ITC features in the top three spot for 15 of the funds, while Reliance Industries makes the podium spot for 13 of the funds.

On the debt side, Quant has three funds, of which two - the Quant Liquid Fund and the Quant Gilt Fund - have consistently underperformed their benchmarks. On the other hand, the third fund, Quant Overnight Fund, has grown in tandem with its benchmark, outperforming it over five years.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.