Quantum Long Term Equity Fund's ability to generate higher-than-market returns over the long term with relatively less volatility than most other equity diversified funds makes it an ideal choice for a core portfolio. The fund's three-year return of 13 per cent has not only comfortably beaten its benchmark, Sensex Total Returns Index (TRI), but also some of the best funds such as HDFC Top 200 and DSPBR Equity.
Suitability: Quantum Long-Term Equity is the ideal choice for any investor looking to build wealth over the long term through equities, albeit with limited downside risks. The fund's strategy of ‘buy and hold', besides its approach of remaining fully invested in equities during downturns would work best in investors' favour through systematic investment plans. For instance, over the last three years January 2008 to date — when markets witnessed significant correction in 2008 followed by a spectacular rally in 2009 — an SIP in the fund would have returned an astounding 29 per cent compounded annually as against a 13 percent annualised return through lump-sum investment.
Investors should note that SIPs should be continued for fairly long periods of at least 3-5 years to work best. This is more so in the case of Quantum Long Term Equity as the fund has not been too successful in sharp rallies such as the one witnessed in 2007.
Strategy and performance: Quantum Long-Term Equity comfortably beat its benchmark well over 60 per cent of the times on a rolling return basis over the last three years, thus establishing consistency in performance.
Earlier, though, with a return of 45 per cent in 2007, the fund trailed its benchmark as well as a number of peers. Its conservative approach and limited exposure to mid-caps may have led to this underperformance. Lower weight to mid-caps means that the fund may not be among the top-performers in a broad-market rally.
While the fund did see lack-lustre performance in the 2007 rally, the subsequent upswing, beginning from the March 2009 lows and a somewhat volatile market in 2010, proved to be a good opportunity for Quantum Long Term equity to demonstrate its performance. In the 2009 rally, the fund comfortably beat its benchmark by a good 20 percentage points.
In 2010, its 29 per cent return was less than a percentage point than that of HDFC Equity, one of the top funds last year.
The fund rises to the occasion during market rallies that follow prolonged correction as well as in turbulent markets as it did in 2010.
Some of its exit calls, such as Titan Industries or Trent in 2010, appear well-timed.Financial services and technology continue to be the fund's favoured sectors.