Investors can buy units of Quantum Long-Term Equity Fund. The fund has a strong track record of riding out volatile markets, such as the present one, well.

This it does by biasing its stock picks towards large-caps and taking cash/debt calls. For example, in its latest portfolio as of February 2013, only 83 per cent of its holdings are in equities, with the rest being in money market instruments.

Within equities, three-fourths of the stocks it holds are large-caps (market capitalisation of Rs 7,500 crore and above).

This makes the fund suitable for investors with lower risk appetite. However, since the fund generally adopts a buy and hold strategy, only investors who have a longer-term perspective can take exposure.

Performance

Quantum Long-Term Equity Fund has comfortably outpaced its benchmark — the Total Returns Index-Sensex — over longer time frames of three and five years. The TRI Sensex takes into account dividends distributed by companies in its returns. Its five- and three-year returns place it ahead of other established diversified funds such as HDFC Top 200, HDFC Equity and Franklin Bluechip as well.

The fund’s performance in declining markets is noteworthy. In the bear markets of 2008, while the Sensex slid 52 per cent, the fund arrested the drop in its net asset value to 47 per cent.

More recently, during the 2011 fall, the fund contained losses at 20 per cent, as against the Sensex/TRI Sensex fall of 24 per cent.

However, it has not put up a great show during secular rallies, a good example being 2007.

During this period, the fund gained about 4 percentage points less than the 45 per cent gains clocked by the Sensex, placing it in the last quartile of diversified funds, categorised by returns.

This could perhaps be because this rally was led by mid-caps.

But the fund did outperform in narrower rallies such as the one in 2012, although the returns were not top-of-the-class.

Portfolio strategy

The fund maintains a compact portfolio of around 25 stocks. It adopts a buy and hold strategy. In the last six months, for instance, it has entered only one stock, Indian Oil, and similarly exited only Tata Global Beverages. Crompton Greaves and Indian Hotels are among the few mid-caps held currently.

With regard to sectors, the fund seems to churn them based on valuations. For example, while it held about 7 per cent in FMCG stocks for most of 2011, it gradually cut down exposure in 2012 and entirely exited the sector in the first two months of 2013.

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