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Our Bureau

Mumbai , Feb.17

QUANTUM Asset Management Company Pvt Ltd, the new entrant in the domestic mutual fund segment, is adopting a `first of its sort' strategy for reaching out to investors in its new fund offer.

The strategy, which is aimed at reducing distribution expenses to minimum, would allow investors to put in their investments through the Internet payment gateway www.QuantumAMC.com.

Mr Ajit Dayal, Director, Quantum Mutual Fund, told Business Line that the AMC has tied up with HDFC Bank, ICICI Bank, IDBI Bank and UTI Bank for investments in the NFO `Quantum Long Term Equity Fund'. These banks cover 95 per cent of the Internet bank accounts. "We want to reduce the initial launch expense as minimal as possible for the benefit of investors. Internet offers a fabulous distribution mechanism," Mr Dayal said.

Commenting on the stock market trend, he said that from 1984, when the BSE Sensex was at 400 levels to 2006 (10,000 range), the stock markets have risen by 16 per cent per annum (for 22 years). Quantum Advisors Pvt Ltd, the sponsor of Quantum AMC, as an investment advisor and asset manager, was able to outperform the market over a period of time. For its PMS clients (since 2000 till now), the Quantum (at the sponsor level) has been able to outperform the index by about 4 per cent. During the last five years, the BSE Sensex has gained 18 per cent per annum while the Quantum gave its PMS clients a return of about 22 per cent.

The NFO will be focusing on three broad themes — domestic consumption, exports and infrastructure. In the current scenario, he said infrastructure (broadly) is relatively less attractive, according to Quantum MF's Senior Fund Manager & Head (Research), Mr I.V. Subramaniam. "We find less value in infrastructure stocks today. There is disconnect between revenue streams and sustainable business," he explained.

On the investment strategy, the price-to-earnings ratio will be a broad guiding factor. "At 17-18 times price-to-earnings multiples, the current valuations are not that bad," Mr Dayal said. Since 1990, the price to earnings multiple was closer to 15 (after leaving out unnatural events such as the Harshad Mehta rally and the tech bubble periods) over the last 16 years. The EPS growth per annum during that period was 17 per cent. The price to earnings multiple for last three years (2003-2005) was 18 times while the EPS growth per annum was 28 per cent. According to Quantum's analysis, the next three years (2006-08), the EPS growth per annum will be 15 to 18 per cent range. "Relatively speaking there is no value at these levels," Mr Dayal said.

But, a main factor that differentiates Quantum from other funds is that the AMC is not shy of sitting on cash, Mr Dayal said. This will ensure that the NAVs will be less impacted on a falling market. For instance, during the 2001 crash, the NAVs of its funds (PMS clients and foreign clients) were down by only 4 per cent, compared with 18 per cent fall in the BSE Sensex. According to an analysis by Quantum, NAVs of some leading mutual funds fell as much as 30 per cent during that period.

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