Over the past one year, the markets have favoured large-caps over mid- and small-cap stocks. If the broader markets do catch up with the rally some time next year, multi-cap funds could be a good way to play a recovery. The category itself is barely two years old, but many older schemes converted themselves to the category and have been around for long.

In this regard, Quant Active (Quant Growth earlier) has been a consistently top performer across timelines. After Quant Capital took over Escorts Mutual in 2018, Quant became a fund house. Escorts had been around for nearly a couple of decades.

Though Quant Active does have a defined investment framework in theory, it is hard to place it strictly in any of the common styles of growth/value/contra. It does seem to be following an opportunistic style of investing and that is working quite well for the fund. Investors are pumping money into the fund.

Consider this: From managing less than ₹7 crore in November 2018, Quant Active commands assets under management of ₹3,480 crore as of November 2022.

Here’s why the fund can be a good addition to your portfolio, if you have the appetite for above-average risk and high volatility.

Consistent show

Quant Active (including its earlier version with Escorts) has a track record of over 20 years. In the past decade, the fund has done exceptionally well and has outdone other schemes in the category and the Nifty 500 TRI as well as BSE 500 TRI.

Rolling five-year returns data from January 2013 to December 2022 indicates that Quant Active has delivered average return of 18.4 per cent, placing it on top of the group. This is higher than peers such as Invesco India Multicap, Sundaram Multicap and Nippon India Multicap by a margin of 3-7 percentage points.

Again, on a five-year rolling basis over the same period mentioned earlier, Quant Active has beaten the NSE 500 TRI and BSE 500 TRI all the time.

In the last four-five years, when the markets fall, the fund’s NAV also declines almost to a similar extent. But during rallies, it outpaces the broader markets and indices by a wide margin — the June-November 2022 and March 2020-October 2021 upmoves being good examples.

Portfolio churn

Market regulator SEBI has stipulated that multi-cap funds must invest 25 per cent each of the overall portfolio in large-, mid- and small-cap stocks. The remaining 25 per cent is left to the fund manager’s discretion. Till late-2020, Quant Active had invested 35-50 per cent of its portfolio in small-cap stocks. But after SEBI’s multi-cap diktat, the fund has upped the large-cap portion of its portfolio to around 42-50 per cent, while mid- and small-caps hover around the 25-per cent mark (give or take a percentage point or two higher or lower).

Quant Active has what it calls a VLRT (valuation analytics, liquidity analytics, risk appetite analytics and timing) framework. In the last few years, the fund has churned its portfolio considerably in the quest for better returns.

The scheme does appear to be following a momentum and opportunistic style of investing.

It spotted winners in pharma and software sectors early in 2020 and increased stakes in these segments. Towards mid- and late-2021, it trimmed exposure to both these sectors, and especially steeply with software, which has helped the fund escape deep correction in stocks of the segments. Similarly, it spotted beaten down segments such as auto and metals in 2021, rode the rally in those stocks and reduced stakes this year.

Over the past several months, it has upped stakes in banks, cement and FMCG sectors.

In terms of stocks, the top holdings keep changing. Indeed, the picks are quite unconventional. How often do you find Patanjali Foods, Punjab National Bank, Linde India and Adani Ports among the top-10 holdings of funds? The top-10 stocks in Quant Active account for 40-50 per cent of the portfolio. But overall, it holds 50-70 stocks, thus making the portfolio diversified with the other half of its portfolio. Sector exposures are also not concentrated.

Given the fund’s sound track record over the past four-five years in terms of higher risk-adjusted returns, investors can consider Quant Active for the long term, with a five-seven year perspective at least. The SIP mode of investing would be best route to take exposure.