Mutual Funds

Quantum Long Term Equity: Invest

K. Venkatasubramanian | Updated on June 23, 2012


The fund has outpaced peers with established track record.

Investors can buy units of Quantum Long Term Equity (Quantum Equity). The fund can be termed among the best-of-breed in its ability to deliver consistent, market-beating returns.

Over one-, three- and five-year timeframes, the fund has outperformed its benchmark – Total Return Index – Sensex.

The level of outperformance has been to the tune of 4-10 percentage points. The TRI Sensex includes the dividends distributed by companies and is therefore a more rigorous benchmark than the Sensex itself.

In the last three- and five-year periods, the returns delivered by the fund place it among the top or top few in its category.

The fund has outpaced funds with established track records such as HDFC Equity, Fidelity Equity and Canara Robeco Equity Diversified.

Quantum Equity is a multi-cap fund, but has a large-cap bias in choice of stocks. Large-cap focus may be a desirable strategy for a fund that seeks consistent performance. Large companies have better revenue visibility than volatile mid-cap stocks. This provides comfort, given the gyrating markets over the past 18 months.

Barring 2007, when the fund missed out a rally dominated by mid-cap stocks, in every subsequent year it has done better than its benchmark in delivering returns in rallies and containing declines in market falls.

The fund is fit for the core portfolio of investors with moderate risk appetite. Exposure to the fund can also be taken in the form of a SIP (systematic investment plan) for the long term.

Portfolio and strategy

Quantum Equity adopts a ‘buy and hold’ strategy with respect to the stocks that it holds, with valuations too playing a key role.

In the last one year, just two stocks have been brought into the portfolio and three have been exited. The fund maintains a compact portfolio of 25 stocks.

Exposure to individual companies is restricted to well under 5 per cent of the portfolio, except in the case of 3-4 stocks. Large-cap stocks (greater than Rs 7,500 crore) generally account for over 65 per cent of the overall portfolio.

In terms of sectors invested in, there is a fair degree of stability. Banking has always been the top sector held, followed by software.

Over the past one year, the fund has reduced exposure to the consumer non-durables segment as the valuations of many stocks in this space have become more expensive. But it increased weight in the auto sector.

The limited churn in the fund has meant that the expense ratio is just 1.25 per cent, which is among the lowest in the industry.

Quantum Equity takes substantial cash calls periodically, especially during volatile markets.

For the past one year, the proportion of cash and cash equivalent in the portfolio has been around 15 per cent, in light of the extremely volatile markets.

This has helped the company contain downsides and also preserve cash to buy stocks when opportunities crop up.

The fund house generally does not believe in pushing its product through distributors. Investors can buy units directly through the AMC’s web site or its offices in select cities.

Published on June 23, 2012

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