/This multi cap fund has 53% in small cap stocks, also topping return chart

This multi cap fund has 53% in small cap stocks, also topping return chart

You might have heard during the recent controversy on new Sebi norms on multi cap mutual funds that most multi cap schemes have ver little or nil investments in small cap stocks. Here is surprise for you: introducing Quant Active Fund, a multi cap mutual fund scheme with 53% of its assets in small cap stocks, and a topper of the return chart in the last one year. The scheme has been consistently among the top five perfromers in one, three, five, and ten years.

For those who are not familiar with the scheme or the fund house, Escorts Mutual Fund became Quant Mutual Fund after Quant Capital acquired the fund house in 2018. The scheme is managed by Ankit A Pande and Sanjeev Sharma

With an asset base of Rs 36 crore, the scheme has given a return of 15.51% since inception. The scheme has given 26.14% returns in one year, 9.85% in three years, 12.36% in five years and 10.24% in 10 years. Here’s a comparison of returns with the multi cap category:

1-year 3-year 5-year 10-year
Quant Active Fund 26.14 9.85 12.36 10.24
Multi Cap category average 1.20 1.35 6.91 8.22

Source: Value Research

Speaking about the portfolio allocation, the scheme has a whopping 53% of assets allocated to small cap stocks, 27.16% in mid cap stocks and the rest in large and giant stocks. Here’s a comparison of the allocation of Quant Active Fund to the multi cap category average:

Sector Quant Mutual Fund Multi Cap Fund Category
Chemicals 24.4 5.96
Healthcare 13.05 9.03
Financials 8.86 26.79
Energy 12.82 10.69

Source: Value Research The scheme is bullish on certain sectors that the multi cap category is not allocating too much to, like Chemicals and healthcare stocks. The scheme is also allocating more than category average to healthcare and energy stocks. However, unlike the category average, the scheme has limited exposure to FMCG and construction stocks.

Here are the top 10 holdings of the scheme:

Company name Allocation
Majesco 8.69
Deepak Fertilisers & Petro. 8.15
Bharat Rasayan 6.60
Sumitomo Chemical India 6.05
Reliance Industries 5.64
Grasim Industries 5.35
BHEL 5.02
NHPC 4.84
Strides Pharma Science 4.39
Rallis India 4.16

Source: Value Research

Sandeep Tandon – CEO & CIO, Quant Mutual Fund, explains the performance of the fund and allocation to small cap:

“We are very framework-centric in our approach. We have a model called VLRT model. We don’t look at only valuations. We also look at liquidity analytics, risk appetite and timing. I think that has helped us. Why we have small and mid caps and small caps in large numbers is because Quant risk appetite numbers very multi-decade low in March end. On the other, the liquidity (good as well as bad) was rising across the globe. This is lethal combination. When investors thought the markets are going to collapse, small and mid caps rallied and that’s what we predicted in March end. That translated in returns.

Second point is stock picking. Last year in September, our data showed that some ‘favourite sectors’ are not good buys and we sold. We increased our exposure to pharma, agro-chemical and speciality chemical and pruned our exposure to financials. We started adding pharma when it reached the neglected category. We ignored banking and financials because our data showed it has ran up too much.

Sebi has recently changed the mandate, but we are not far away. We have around 15% allocation to large caps which can be increased to 25%.”

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