Quantum Long Term Equity: Go with it for the long term

If you are looking for a scheme that will provide protection during volatile market phases as well as deliver healthy returns over the long term, you could consider Quantum Long Term Equity. The fund has a valuation-based approach to stocks. The fund pares exposure to stocks on reaching a price target (based on valuation parameters).

Quantum Long Term Equity has underperformed its benchmark and category over the last one year. It has missed the opportunities in the past year on a few counts.First, the scheme did not cash in on select themes, such as pharma, due to its cautious approach of avoiding expensive stocks. The fund has not invested in pharma stocks in the last five years.

  Likewise, the scheme also missed the opportunity in stocks, such as Axis Bank, Gateway Distriparks, Larsen and Toubro and Container Corporation of India by selling off early. Increasing exposure to cyclical stocks that were out of flavour, such as oil and gas majors ONGC, GAIL and steel biggie Tata Steel over the past year, also dragged the scheme’s NAV. Besides, even as equities continued to edge higher, Quantum Long Term Equity held almost 30 per cent of its assets in cash between June 2014 and March 2015. As a result, the fund missed out on the rally during that period, leading to significant under-performance. 

 However, despite the short-term underperformance, the fund has had a good track record of delivering healthy returns in the long term. The returns over a five-year period have been higher than its benchmark, the BSE Total Return Index (TRI), by three percentage points. It has also outperformed its category average (i.e, category of large-cap funds) by about 2 percentage points.

Due to its valuation-based strategy and defensive approach of moving to cash or debt, the fund also contains downsides well during volatile phases. For instance, during the November 2010-December 2011 period, the fund managed to contain the decline in its NAV at about 22 per cent, lower than the 24 per cent fall in the BSE TRI Index.

Quantum Long Term Equity also scores on consistency. The scheme’s annual returns over the past five years have been higher than its benchmark almost three-fourths of the time.

It has taken corrective action on its portfolio as well. The fund has now upped its equity exposure and holds about 82 per cent of its assets in equities in its latest portfolio. With cyclical stocks still being market favourites, over the last six months, the fund rightly has increased exposure to stocks of automobile and its ancillary companies.

This sector now accounts for almost a fifth of the total assets. The fund has also loaded up on stocks in the oil and gas, financials and IT space.

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